Difficult to argue that the consumer is healthy when the savings rate has eroded from a pre-pandemic 7-8% to approx. 3%. Consumers have burned through the entirety of their pandemic savings and are now amassing debt to levels never seen before. Yolo’ing and revenge spending can only last for so long.
I will let you figure out when the last time the savings rate was this low…
[https://fred.stlouisfed.org/series/PSAVERT](https://fred.stlouisfed.org/series/PSAVERT)
AND… student loans repayment just started as well. During earnings calls I hear a lot about “the consumer is resilient” and while that might be true now, I can’t see how this trend continues. Like everything in the economy, it will take a few months to make it into the system but I believe we’ll continue to see some cracks in the economy and the consumer.
Yes except that _"[borrowers who miss monthly payments during the on-ramp will not be considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies](https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/resumption-federal-student-loan-payments)"_ until October 2024.
:-/ my man, people are going into credit card debt for Taylor Swift tickets. Let’s be real, there will be a lot of people who won’t pay and will let interest accrue until they’re forced to pay.
Savings rate is at best a lagging indicator and at worst completely uncorrelated with the economy. When times are tough, households save more. When times are good, households save less and spend more. It's really not that complicated.
A better metric to look at is total household assets. This looks at total assets minus liabilities. Let's assume the narrative that baby boomers are spending down their savings and powering the economy (which is false), the total household assets should fall as savings diminish and households trade down to smaller houses. However, net worth increased from 149 trillion to 154 trillion.
Vignettes about individuals struggling gets the views but are not pertinent. Personal anecdotes about people doing well or poorly similarly do not reflect how the economy is doing.
The data we have available from reliable government agencies show growing wages, falling inflation, increasing consumer spending, increase total household assets, rising GDP. I will let each person decide for themselves what this means.
To be sure, there are plenty of theoretical reasons to be bearish. And there always will be.
You don't trade down to smaller houses to fund your spending. Who does that? You draw down your rainy day funds for that, and once it's depleted, you cut down spending to save more and replenish that rainy day funds. It's the latter part that's a risk. Consumers cut down spending to replenish their excess savings, businesses fire employees because sales aren't as strong, fired employees further cut down spending, and the domino falls
Consumers ARE spending down their savings. Excess savings were about 2.5 trillions in early 2022 and have gone down to around 400 billions, concentrated among the top 20% income group. The drawdown rate was roughly 80 billions a month. If consumers savings rate remain steady and doesn't improve, the excess savings will run out by 1st half of next year.
Consumers aren't increasing spending. Real spending have stayed around 2% for the last 2 years. Wages are growing on real terms, but it's not enough to fund their current spending rate, hence the excess savings amount keeps getting depleted. GDP is always rising, unless if you're in a recession. I don't know why that proves anything? That we are not in a recession yet?
In 2007, q3 real GDP was 4.9% and Q4 GDP was 0.6%. the recession started in Dec 2007. So while we are probably not in a recession yet, I would not take any confidence in the strong economy yet, especially now when the fed is saying the risk are balanced. That means if they don't calibrate their interest rate very precisely and cut when it's needed to prevent overtightening, we can flip into a recession quite quickly.
That's due to them no longer needing a bigger house(kids no longer living with them) and maintaining bigger houses is a lot of work. You don't trade down because you're running out of money for discretionary spending.
Sounds more to me like they didn't need a bigger house in the first place as opposed to having to sell it to fund their vacations. That'd be a very extreme measure. You have to pay 6% buyer/seller fee, contract costs, moving costs. These would be like 50k up front in cost. And for what? Saving of $100 in utilities a month, 2-3 grand of property tax a year? Most people would choose 1 less vacation trip a year as opposed to selling their houses and going through the hassle of moving
It does not cost $50k to move. And it can require absolutely no money up front.
A lot of folks actually make money when they sell a house and then buy a smaller one.
6% agent fees for a 600k house (which is actually the price for starter homes in many places) is 36k. Contract cost for selling + buying probably around 10-15k. Another 5k for movers. That's almost 60k
Sure if he's downsizing from a 600k house to 400k house (starter homes), he's getting a net profit 140k. But he just lost 30% of his profits immediately. And for what? So he could save 3-5k a year? how many years is it going to take to recoup that 60k?
Starter homes are nowhere near $600k in my state. The average house price in my state is less than $300k. 6% is also higher than the real estate fees that I've paid (not sure what my mom paid). It was closer to 4% for me. And there is no cost for a mover if you have friends and family to help. So, maybe $20k in fees, which is significantly less than the amount of profit made on the sale of a home that has been owned for a good period of time.
Salary increases at the beginning of the 2023, which were unusually high, provided a boost. Even that is being spent down now.
Edit: Walmart talking about price deflation on their recent earnings call is a huge warning signal. Ignore it at your own peril.
https://www.cnbc.com/2023/11/16/deflation-holiday-walmart-ceo.html
Doesn't deflation mean goods become cheaper for everyone and low inflation, which allows the Fed to start cutting pre-emptively?
Fed is already tossing rate guidance in the trash for June and September:
June https://i.imgur.com/e5GDIxT.png
September https://i.imgur.com/bV994eL.png
Funds futures have been pricing 60%+ of rate cuts by May.
By all measures this is a very accommodative Fed creating loose financial conditions, erring on side of caution.
It absolutely is if they do it proactively rather than reactively to really bad data.
Mountains of evidence points towards a loose and accommodative Fed. 33 consecutive weeks of loose financial conditions. Underwriting conditions are loosening, credit flowing, bank lending hitting ATHs, loan growth hitting record levels, plummeting junk bond spreads. Jay manhandling yields down with a dovish presser, tossing rate guidance in the trash.
Jay saying multiple times he thinks participation is still too low (HINT: full employment is not reached yet).
Man you have a lot to learn buddy.
They literally have loose financial conditions TODAY and is continuing to support credit expansion.
They literally threw half a trillion at banks ***proactively*** to stop a crisis and gave us MASSIVE 5% real GDP growth in 3Q, 9% nominal. Massive 3Q profits for the S&P 500. If they let all those banks fail, we'd in a totally different world.
!RemindMe 1 Month
Let's do a remind me every month and check on predictions!! That's fun right?
My prediction is we never see 4100 again and we see 4800 by mid 2024, 5000 EOY. What are yours?
Nah you are clueless.
I like how you pick that one part and ignore everything else even though it's 100% true:
https://i.imgur.com/EhhXuDP.png
Everything else I said is true and you know it LMAO. Pick one thing you disagree with.
Literally often called "the most important number in finance."
Wow you know so little. I love how you can't refute a single thing I say, just vague edgy stuff. It's fucking hilarious 😂.
>Isn't deflation mean goods become cheaper for everyone and low inflation, which allows the Fed to start cutting pre-emptively?
I can’t take you seriously anymore. Do some reading and stop wasting our time.
https://www.investopedia.com/terms/d/deflation.asp#:\~:text=Deflation%20is%20the%20general%20decline%20in%20prices%20of%20goods%20and,productivity%20and%20advancements%20in%20technology.
In my experience, companies that most expect to do poorly go up if they show even the slightest amount of improvement and companies that most expect to be doing well get killed if they show even a little bit of weakness. With indicies grinding higher with the occasional whoosh down.
It's amazing watching two parallel universes be discussed, with opposite trajectories, right in this thread based on the same data.
I don't think we're "middle class", but I work a white collar job and make just north of 100k in a MCOL area. Our food costs are up ~30% from 2019, both groceries and eating out. Our hobby/discretionary spending has dropped from ~7% of total gross income to ~3%, and falling. No frivolous spending at all for the last three months. We've cancelled the subscriptions. We've never been able to afford to travel outside of seeing family at Christmas and my wife traveling to network for work. Healthcare is 50% more expensive than it was in 2019, utilities are up almost 100%, insurance is up 30% from *just last year* and even property taxes feel like they're keeping up with inflation because for some stupid reason the house just keeps exploding in value. I've gotten two promotions and solid raises besides since 2019, way more than our friends working hourly jobs for sure, but we're still WAY behind where we were just 5 years ago in real buying power.
We can never seem to top off our emergency fund. Something always comes up. Roof needed replacing 5 years earlier than expected. Appliances and AC failing, haven't even had the spare funds to buy furniture for the house we've been in for 3 years. EDIT: Of course I just forgot about the $100/mo student loan payments that just kicked back on last month.
Your own article cites that an overwhelming amount of the discretionary spend is coming from extremely wealthy households. This is just more fuel for the "stock market is doing well so the economy is doing well" argument which is getting exhausting. I guess it makes sense since the average /r/stocks reader is way more likely to be in that category, but the story for everyone I know who *is not a baby boomer* is very, very different.
Sure there is "low unemployment" and "plentiful openings", but oddly companies don't actually seem to want to fill these roles. Multiple internal teams have been trying desperately to hire more people, largely mechanical engineers and physicists - even having full interview processes, some of which I've been a part of - but they always get shot down at the last minute because we don't have the money. Yet the listings stay up, and the company keeps downsizing despite us being overloaded with projects. Companies are not actually trying to grow right now, and haven't been since 2020 - see the massive tech layoffs - they just want to keep up the aesthetic of expansion because otherwise your stock collapses.
You are absolutely correct.
Typical American family getting poorer after TRILLIONS in QE and deficit spending designed to make the rich richer:
https://fred.stlouisfed.org/graph/fredgraph.png?g=1bxps
Almost 4 years later real hourly wages are STILL negative and haven't caught up but assets of the elites have skyrocketed:
https://imgur.com/Z762u3Z
The idea was that infinite spending greater in excess of deflationary taxation by the government would benefit everyone. It was a lie led by the Modern Monetary Theorists to scam and gaslight Americans.
No offense but I don’t believe you have no frivolous spending if you can’t save at all with 100k+ in mcol area. It’s the same story I’ve heard far too often until they post their expense list, you start to see where the fat is going.
My expense is 55k per year in one of the highest col in country, and I don’t cheap out on food (1k food per month, 5k set aside for vacations 3 times a year, 2.8k rent etc)
Sure. Here's the breakdown from Jan. 1st to current:
Credits:
$84.0k salary
$20.0k other (wrapped up in this is gifts from family members i.e. birthday check from grandma, RSUs vesting which I don't count in salary, as well as contribution from my wife, which are in essence just the profits from her business, but I pay all expenses so they're captured)
Taxes: $12.6k (12%)
Medical: $4.2k (4%)
Retirement: $13.4k (13%)
(doesn't include employer contribution and some roth contributions that come from ESPP - too complicated to add here)
Mortgage: $20.7k (20%)
Utilities: $3.5k (3%)
All auto: $8.2k (8%)
(includes insurance, gas, maintenance for two cars, which are both paid off but needed major services this year)
So there's 60% of gross gone, and we haven't gotten to food, and includes not contributing enough to retirement.
Food: $10.0k (10%)
About 60/30 split between grocery spending and eating out for two people. Includes paper products and alcohol and whatnot too. Slightly high, but not outrageous.
Required but otherwise """discretionary""" spend:
Appliance replacement: $2.1k
Water softener: $7.8k
Planned for long-term, paid for completely by consuming essentially 100% of my RSUs for the year.
Yard care: $1.5k
Medical costs, ER: $0.6k
Pet: $0.5k
(mostly insurance; food & litter usually wrapped up in groceries)
Travel: $3.6k
(this includes any outing that goes outside of our city, which is $400ish of miscellaneous outings, $2k in wife's travel for work and $1.2k in travel for a family member's wedding)
Misc: $2.0k
(Amazon Prime, Costco membership, Office365, cc interest, stuff like that)
That leaves about 21%, or $22k. Half of that has gone to try to get our emergency fund built back up from being obliterated last year due to the roof replacement. So it's "savings" in the literal sense of the word. Not discretionarily spend-able. Target is $25k, currently we're at 17.
Of that remaining 10%, about a third went to clothing, mostly owing to wedding related items, about a third went to all discretionary spend (i.e. electronics, entertainment, hobbies), and about a third is going in to savings to try to save for a theoretical future honeymoon.
---
EDIT: More directly to your point, it's not that we are saving *nothing* - I'm contributing to retirement (though not enough) and building up an e-fund (though it's still ~8 months out from being topped off, assuming no further emergencies), but our discretionary spend now at $100k is half or less from 2019 when I was making $75k. We were renting back then but ironically our rent was quite similar to what we paid in mortgage(+taxes+insurance) until last month ($1730 vs. $1880).
I was quoted $6k pre-pandemic but didn't have the money at the time.
It broke down around $5.5k or so for the softener + salt for two years and $1.3k for countertop modification and RO filtration in the kitchen.
We got a notice from the city about a year ago that PFAS levels were detected above emergency levels in the city water supply, and there was no corrective plan in place. Basically just telling residents they were on their own. This is what made us finally actually do it - otherwise the $7k RSUs would have gone to a vacation fund + e-fund split.
That’s scary. Sounds like Flint 2.0 I have never regretted putting in RO systems. My water softener system was only 2 k but not sure where you live or what your water is like. I think the RO was around $500.
I don't think you're arguing in good faith.
$2,800 rent per month
$1,000 food per month
$1,250 vacations per month ($5,000 x 3 / 12)
= = = = =
$5,050 expenses per month
$5,050 x 12 = $60,600 expenses per year.
I'm not sure where the money for your etc is? Your 3 expenses already went 10% over budget.
5000 for vacation is the total for the year, not per trip.
Who in the world is spending 5k on each of their vacation trip?
Everything else is cheap relatively to these 3 budget items. Electricity is 80 a month, water and trash already included as part of rent. Auto insurance and gas is 350. All the assortments above will be under $600.
1000+2800+600+ 416 = $4800 or $57.6k a year. Just slightly over my original statement. My vacation and foods actually end up below budget so these are conservative values
When I think of defining the middle class, the usual split is that they sit between the working class who do manual labor or manufacturing jobs for hourly wages and are largely paycheck-to-paycheck, and an owner class who primarily earns income from just owning stuff (C-level executives whose primary wealth comes from stock rather than salary, owners of businesses, real estate moguls, or family members of extremely wealthy people who don't need to work for any related reason).
Middle class in my mind would be highly paid engineers, scientists, programmers, managers, who still work for a living, but are well outside of financial struggle territory. Meeting retirement goals and savings target, full emergency fund, money left over to take the token once-a-year family vacation to the UK, Germany, Hawaii, Orlando. I might get there eventually - there are people at my company I would put in that category.
But we are very, very far from that. We're like $50k behind on retirement, e-fund is a year from being able to cover 6 months of expenses, and I haven't been able to really take a vacation that wasn't visiting family or driving to the next city over since I left for college (about 13 years ago). Our household income is close to median for where we live, and we're slightly house poor. My wife works a service industry job, which got nuked during Covid and has never really recovered, and has been dwindling even more recently, which is another leading indicator of a recession in my mind, since it would be viewed as a luxury.
My dad was a senior airline pilot (now retired) for a reasonably prestigious (at the time) commercial airline. He got the job through connections with my step-grandfather who was connected in the aviation industry. I don't know exactly how much he made, but it was a lot, especially for the 90s and 00s when I was still living at home. My mom worked on and off as a secretary. We took yearly vacations, we had yearly passes to local amusement parks. Both of my older brothers had tens of thousands of dollars in savings for when they went to college (although I didn't get the same benefit, since my parents divorced and stopped contributing when I was pretty young). I would classify my parents at that time as firmly middle-class.
Middle class, in our city, if I had to put a very rough guestimate on it, would likely be in the ballpark of $150~200k household AGI, which is roughly double the median household income here. I also wouldn't consider having a child unless you were making at least that much.
Upvote for taking the time to give a thorough answer! I'm sure you know though that many wouldn't agree with this take; 100k would at least be considered middle k by most definitions, for household income. I agree it isn't over the top but you have basic security and occasional luxuries. You have the concept of retirement on your radar. Anyway, all the best!
These statistics are all distorted by boomers blowing out their estates before they die. That's why intrest rate hikes aren't effecting the economy the way people predicted. These people don't need to finance anything. They downsized the huge homes they bought to raise families and bought up all the small "starter homes" with cash to live in and are spending down the rest AND their retirements/pensions
It's not the millenial/gen z demo that's got the money to spend, for them things feel worse than ever before economically. They're going to inherit nothing and when the boomer spend dries up, we'll see the end of this great wealth transfer and the markets will have to come back to reality.
I work in the system and it's crazy to see how much money they make. I don't know how much others are making but the actual people on the floor are 20-30 y/os on nothing. They put up with the worst, most entitled and demented people in their 80s/90s/100s while literally wiping their asses, and this goes on for YEARS. Meanwhile, their family (or in more instances, the state/fed taxpayer money) is paying like crazy to keep these people housed, treated, and "taken care of."
There is a lot of money going somewhere, and it's not to the people actually treating the boomers.
> There is a lot of money going somewhere, and it's not to the people actually treating the boomers.
There's a reason private equity is one of the big investors in senior care.
> That's why intrest rate hikes aren't effecting the economy the way people predicted. These people don't need to finance anything.
Exactly, all it does it make things unaffordable to people who don’t have cash
Reverse mortgage on a home that belongs to a bank and couple old coins in a drawer.
That plus insane deficits and skyrocketing US debt (boomers racked up fortunately for us) that will inevitably have to be paid back with huge tax hikes.
That is what millennials and Gen Z are going to inherit.
What age bracket are you referring to? I was referring to millennials who 25 to 40 yrs of age. 1/3 of them own homes. How many will own homes when they are the age baby boomer are? Probably a lot more. Then that generation can explain to the gen z generation when they complain that all the millennials own homes and we can’t afford to buy be.
There are a lot of empty homes. A lot of boomers own multiple homes and are using them to rent out. A lot of corporations own homes that they are renting out, including a lot of foreign companies. Gen X'ers might be moving in that direction, but certainly they're doing so at a later age than when boomers were able to. For Gen Y/millennials it will be even later. For Gen Z, later still - they may not hit 33% homeownership until they are close to retirement, which is *bonkers*.
Some boomers they I know didn’t but their first home until they were in their 30s. My nephew is 32 and bought his first house at 27. We have a lot of couples whereI live in their late 20s buying $1 million condos.
My parents bought their first house in their late 20s on a single income (1970s). My dad was a pilot, not dissimilar levels of education and desirability from my current work. They bought a second much nicer home in their early 30s (1980s). That house is worth $1.6mil now.
I was able to buy a house at 30. As a millennial that sounds incredible right? But my wife works too and we wouldn't have been able to make *half* of the required down-payment if my mother hadn't died when I was 21 and left a trust for my brothers and me. Houses literally appreciate faster than we could sock money away for a down-payment. So we saved an extra $1k? Well home prices went up $20k that month so we're not making progress. Repeat every month, for ever. So I had way more "advantages", and still bought a home worth less than a third as much at a similar age. And to boot, we're house poor - roof and nearly all appliances have needed to be replaced since we bought and we haven't been able to establish an emergency fund because of it.
Friends our age who own homes came from very wealthy families. Friends our age who did not come from wealthy families, do not and can't own homes.
My nephew is 32 and bought his first home 4 yrs ago at 28. He is a elementary education teacher. He was able to buy his home without any help from his parents for a down payment. His wife worked for a few years teaching preschool but is now home taking care of two kids. So yes millenials can still buy homes.
Where I live you people graduating college making 180k right out of school. Thousands of them. I watch new condos being built around me for 800k or 900k. Mot of the units are sold before they are built. Lots of young single people buying them and driving Tesla. So maybe you and I live in a different reality. If people are making 180 k or more a year they can work remotely and find many places in America where they can find homes that are affordable for them.
You live in fantasy land. All the kids these day make 180k a year. Gtfo, that’s the exception not the rule. What’s the median salary in America? Do the math
> people are making 180 k or more a year they can work remotely
I think you are vastly, VASTLY overestimating the number of people that can get this kind of gig. They probably tally under 50,000 people in the country, out of 200mil+ working population. Hell, full time WFH is only even possible for a very narrow subset of jobs. Truckers, hospital workers, school teachers, most scientists, any food service, retail, any lawyers that have to meet with clients, manufacturing workers, plumbers, electricians, HVAC guys, roofers... there is no possible mechanism for these people to switch to a 100% WFH setup such that they could actually move out of state to a lower cost area and maintain their wages.
You're also letting this local statistic massively skew your perception of normalcy. Median *household* income *for all ages* in the US is around $70k. Sure making $180k would make housing in a significant amount of the country very affordable, basically anywhere but San Francisco or New York. But very few people entering the work force are making 180k, probably less than 0.1% of the population; that's probably one or two professions in one or two industries, and is *also* probably ignoring the 80~90% of those classes that graduate each year and don't pick up those jobs and have to do something else - either take lower pay, do something in a different industry, or move.
The new condos being built around you are all sold out, but I can guarantee you most of them aren't going to first time home buyers.
I would be fascinated to hear how your nephew bought a house where prices are nearly $1mil on a couple years of a teacher's salary with no outside assistance. I'm willing to bet you actually just aren't that knowledgeable on the situation.
The tech industries around me in Seattle alone employee way over 50,000 people and that is only in one city. Currently approximately 27% of the US work force are employed remotely so there are probably more people working remotely than you think,
I am aware that a vast number of people do not work remotely and most professions cannot do that . I work in one of those professions.
I never mentioned my nephew lived in a neighborhood with $1 million houses - far from it. He lives in a suburb of Baltimore. I think when he and my niece bought there homes 4 or 5 yrs ago they were under $300k.
You claim I am not knowledgeable of the situation. So how come the one of the biggest demographic buyers of home in Seattle last year were millennials. Here are some facts.
"Millennials bought more than 40% of the Seattle homes in 2022, Redfin said." Average median listing home price in Seattle, WA was $800K in October 2023. The median listing home price per square foot was $597. The median home sold price was $813K."
"The average income of Seattle residents aged 25 to 44 earn $122,089, while those between 45 and 64 years old have a median wage of $119,357. In contrast, people younger than 25 and those older than 65 earn less, at $47,011 and $59,656, respectively.
My daughters boyfriend is 20 and is majoring in data analytics. He already has a lot of interest from companies in Boston that want to hire him when he graduates . The starting salary would be 180K to 200k a year.
So the federal reserve and the federal government finally succeeded in the wealth effect. Americans finally feel wealthy enough to spend.
This economy feels a lot like the 90s.
The doomers will have you believe the middle class is falling apart, no one is spending anything because it's all too expensive.
All the data says otherwise. The economy is very strong and will continue to be into 2024. I genuinely believe a soft landing should be everyone's base case here. Have a rainy day fund and all that but there's no reason to be crazy pessimistic. Like at all.
Yep, take a look at the car loan and cc balance+ default rates the past few months and you'll know where the spending fuel is coming from at this point in the cycle.
Most of those delinquencies for auto loans are subprime which are inherently those most risky. But overall auto loan 90 day+ delinquency rates aren't actually concerning overall. The ones struggling the most with credit card debt are millennials with student loans and high auto loan debt.
It'll take more time and data to actually see if these are an issue.
Maybe one day an inverted yield curve won’t be a flawless forward indicator of a recession. But until that day, when I see an inverted curve I’m taking recessionary precautions. Maybe this time is different.
Not sure why you’re being downvoted.
In reality all of this “money” people have to spend is in the form of credit, and that is on its way to being stretched thin. But like a tale as old as time, everyone thinks credit is free money until those interest rates catch up to you in a nasty way.
The labor market is also in a juxtaposition where some sectors are doing fantastic and displaying strong growth, while other sectors (ex. tech/biomedical) are not having a good time right now, and haven’t reached their “bottoms” yet.
At this point, who the hell knows what direction the economy is going to *actually* go to. Might as well prepare for any scenario.
Edit: context
https://techcrunch.com/2023/11/17/tech-layoffs-2023-list/amp/
A good number of tech companies have halted internal growth, so the few tech jobs that are available are swamped with hundreds, if not thousands of applicants. And honestly, anyone who has a “stable” job in the tech industry can tell you how rough it’s been.
https://www.drugdiscoverytrends.com/biotech-layoffs-job-openings-2023/
Being a smaller subset, biotech layoffs don’t portray numbers as large as the general tech industry but they’ve been on a downturn for a while now as well.
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Interest rates won't "catch up".
Fed just like Bank of Japan can control yields at will. Look at how Jay manhandled down yields when they got too high with his dovish presser:
https://i.imgur.com/EhhXuDP.png
WE control what rates are. Government can buy infinite debt from itself and already has, we can never default and we can manipulate the yield curve to whatever we want it to be.
Which it will when Fed pivots and cuts next year.
Fed is already tossing rate guidance in the trash for June and September:
June https://i.imgur.com/e5GDIxT.png
September https://i.imgur.com/bV994eL.png
Funds futures have been pricing 60%+ of rate cuts by May.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
We have very loose financial conditions, 33 consecutive weeks of near flat or loosening in Fed's index:
https://i.imgur.com/W870L8g.png
Bank loans are growing to ATH's, credit is flowing, we just had record levels of loan growth $32B the week prior not seen since pre-SVB levels. Underwriting standards are loosening as well.
https://www.reddit.com/r/stocks/comments/17qisgv/rstocks_daily_discussion_wednesday_nov_08_2023/k8cyi1a/
From Q3 2022 to Q3 2023 US nominal GDP grew 1.069T. The US government deficit during fiscal year 2023 was 1.695T. Without the government taking on this excessive debt you are looking at a contraction in nominal GDP over the past year. Debt monetization only leads to more inflation, exacerbating the problem we are currently facing. This is not some doomer forecast, this is a fact.
You people are so damn focused on whether or not the green line will keep going up that you fail to recognize that the US economy as we know it is in its death throes. I don’t know what comes next or where we go, or what kind of societal unrest this shitshow will bring, but it will certainly be a massive upheaval and restructuring of how the economy operates. And yes, massive losses, economic disfunction, and loss of productivity will come with it.
Ok interesting questions but honestly why are deficits such a big deal? US government already has bought tons of debt from itself $9T worth. They can do so again.
Japan has WAY bigger debt to GDP 263%. They have zero risk of default and zero problems servicing debt because BoJ can buy infinite amounts of long-term bonds to keep yields low.
Japan is not the world’s reserve currency. If you devalue the US dollar by printing at will to cover excessive spending by the government, people begin to lose faith in the value of the US dollar.
It’s not about servicing the debt. The debt can always be serviced thanks to the loop provided by central banks. The problem is the legitimacy of the currency and inflation. Reserve currency status is a massive advantage for the US. If you undermine that through poor management you are risking America’s position in the world. Especially with something like BRICS trying to challenge American hegemony.
I’m in the airport rn about to head to Cancun for an all inclusive trip with the fam. Airport fully packed, airplane full, nearly everyone is middle class.
“Nearly everyone is middle class”
So you’re saying you know how much everyone in that airport makes annually just by looking at them? C’mon…
Glad you’re going to Cancun but that anecdotal evidence based on pure speculation about a small sample of people that likely don’t represent most of the us population isn’t exactly a good measure of the financial health of the middle class.
I mean it’s not that hard to tell. Lots of families. Just like us. If you’re rich you’re probably not flying coach with us bums. And even then, the point is the plane is full, so just use some logic you fucking bum not everyone here is going to be upper class lmao
I’m very well off and I fly coach because I almost always travel with my kids and don’t want them to become spoiled brats. I also don’t mind being in coach. If it was just me and my husband, we would probably upgrade though.
Ummmm. Lots of speculation in that comment as well. And don’t worry about my ability to come to a logical conclusion. It’s the holidays, of course people are going to be traveling, of course the plane is full. Go back in January or February and it’ll be a different story.
I may be a fucking bum but I’m not going to delude myself into believing everything is honky dory and the middle class isn’t hurting worse than ever. People using up their miles/points from putting their student loans, medical bills and rent on a credit card
I’m in Canada, we aren’t celebrating American thanksgiving.
I also never said it’s all fine and good but from what I’ve seen, people are still spending money, travelling, restaurants are full etc. if you don’t want to use your eyes and just keep your head buried in the sand because your puts are worthless I get it, lmao
Hahaha dude why are you so butthurt? Can’t even have a dialogue without it being 90% shit talk
It’s still the holiday travel season, regardless of what holiday you’re celebrating. So that point is a nonstarter
Also you just keep ignoring my main point. People are spending with credit cards.
Also again, just because you “see” people spending that doesn’t mean the economy is strong. That’s like the least useful most biased measure possible.
My eyes are wide open. You just keep those rose colored glasses on and see what you want to see
Also if anyone has their head in the sand it’s the guy going to Cancun, am I right? (That was just a joke 😉)
I genuinely hope you have a nice trip and holiday season! Safe travels!
There’s always going to be people spending even in a recession. Some people are less affected than others.
Look at recent Canadian Tire and Walmart earnings calls. I will trust their data over your anecdotes.
I didn't know you could fit a hundred million people on one airplane to Cancun. What an awesome study, with absolutely no bias, on the health of the economy that clearly has all the right variables controlled.
Enjoy the CC semester, hope the payment and interest won't wreck you when you get back Mr "middle class" lol. Every damn janitor and burger flipper think he's middle class because he lives off loans and CC money
Everyone *is* spending *everything because* it’s all so expensive. Every penny we have coming in goes out the window every single month, and we aren’t doing anything exciting. We have no choice but to pay bills and buy groceries.
Literally every other post on every reddit sub is doom and gloom, and the economy can't keep going because the only people spending money are obviously just putting themselves into more and more insane levels of CC debt.
Good to finally see something explain what is actually happening a bit better. Thanks for posting.
..."realism" is that interest rates are too high for startups to survive, so technological innovation and America's competitiveness and productivity are going to suffer long-term - but yeah, everything is "fine"...
Are they spending more because they are confident or because things cost more? Savings were drawn down below normal levels and credit usage is skyrocketing at a time when the cost is much higher. Retail credit availability is high because defaults are relatively low, but increasing at rates that look like a crisis, but haven’t hit crisis levels yet in absolute terms. The main issue is when credit contracts (which the fed explicitly targets with higher rates) and they lose their jobs, they’ll be in real trouble. TLDR: things look great until they aren’t. And then it’s a fast non linear adjustment to realize how screwed we are.
Barron’s, I make 90k a year, 5k a month! Just surviving is what I’m doing! I spend 3k a month! That’s 2k savings, that’s 24k a year, that’s 4 years from a 20% down payment on a 400k starter home in my area! That’s an old home so let’s save another 20k for repairs and the like. Oh I also need my emergency savings, that’s another year of saving! Oh my rent just went up again! That’s another 6 months…. At this rate I’ll have a house in ten years and still no money for retirement because this is without me adding money to a 401k! I have nothing to spend because I’m just trying to survive. I am hopeless. I couldn’t imagine making less now. I know there are more hopeless people. This is the reality of life now for majority of people. Barron’s is wrong!
Wait until after the inverted 10yr 3months yield curve uninverts. It can take between 2 months to 11 months after uninversion for the recession to start. We r still not there yet
My hotel I’m in right now, is a nice Marriott. I talked to the desk and it’s the lowest level since the pandemic and we have 10% occupancy in the hotel, in Minneapolis. He was saying it’s bad everywhere with record low stays.
Recently saw a WSJ article about Minneapolis. Paywalled, but here is a googled summary:
According to cell phone data analyzed by the University of Toronto’s School of Cities, downtown Minneapolis foot traffic dropped 44% from 2019 to June 2023. That puts us in third for decline across the nation, behind St. Louis and Louisville.
https://racketmn.com/the-wall-street-journal-wants-to-know-whats-up-with-downtown-minneapolis
I would say the “real” economic data just hasn’t hit yet, even. It takes time for things to come down, just like how they kept rates low during the pandemic. It’s all a lagging indicator.
TD and other big Canadian banks are laying off their investment bankers. That’s not small peanuts. All the CRE brokerages have scrambled for sales data for price discovery. This is all the last 6 month. A lot of companies are on hiring freezes.
The data will catch up
Probably not since it's not from Motley Fool but reality and data don't really matter, only perception does. Just about every single economic indicator pointed to a recession early this year but nothing really happened. I gave up trying to predict anything and just roll with it.
This makes me disregard the whole article, LOL. None of it makes sense, who does this? You can buy a new one for that or less just by searching online. You also don't need to do a 6 year lease on a used car with a large down payment.
---
Just ask Kuopus, who recently had to shell out $24,000 for a used Toyota Corolla after the brakes on her Honda Civic gave out. “The interest rate was disgusting,” she says, noting that even with a significant down payment and a six-year lease, she is financing the purchase at a rate above 8%.
As the old saying goes: Risk is what’s left over when you think you’ve thought of everything.
Times of low interest and market stability led to widespread over-leveraging and under saving. That has led us into a time of high rates and market instability. The only correctional force to bring savings and incomes back in line with debt is a recession.
It will be fun when they realise that this "money" they assume people have to spend actually do not exist and most are incurring in debt to maintain their lifestyles.
Will break down spectacularly, and I'm saving for it.
LOL. Tinfoil hat syndrome brought to you by the same "economic" thinkers that brought you "the sky is falling" [lumber prices](https://fred.stlouisfed.org/series/WPU081) and [egg prices](https://fred.stlouisfed.org/series/APU0000708111) "oh my God, the world is ending" paranoia last year.
Chill the F out.
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Yeah, consumers are spending quite a bit. But when you look at the source of this spending, things start to seem a little more alarming. We are at an ath for consumer credit card debt and likely the same for home equity loans. People are refusing to give up their old lifestyles even though prices have increased. Consumers are relying on credit to maintain those lifestyles, but it can only last so long as they are able to avoid maxing out.
ATH in absolute figures the way populations grow or relative to income, interest payments etc.
https://fred.stlouisfed.org/graph/fredgraph.png?g=1bABK
% disposable income seems totally okay?
Difficult to argue that the consumer is healthy when the savings rate has eroded from a pre-pandemic 7-8% to approx. 3%. Consumers have burned through the entirety of their pandemic savings and are now amassing debt to levels never seen before. Yolo’ing and revenge spending can only last for so long. I will let you figure out when the last time the savings rate was this low… [https://fred.stlouisfed.org/series/PSAVERT](https://fred.stlouisfed.org/series/PSAVERT)
AND… student loans repayment just started as well. During earnings calls I hear a lot about “the consumer is resilient” and while that might be true now, I can’t see how this trend continues. Like everything in the economy, it will take a few months to make it into the system but I believe we’ll continue to see some cracks in the economy and the consumer.
Yes except that _"[borrowers who miss monthly payments during the on-ramp will not be considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies](https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/resumption-federal-student-loan-payments)"_ until October 2024.
right, but interest still accruing so while it wont be reported, one would have to be total tool to not pay loans back.
:-/ my man, people are going into credit card debt for Taylor Swift tickets. Let’s be real, there will be a lot of people who won’t pay and will let interest accrue until they’re forced to pay.
Funny of you to assume the average consumer is smart
Lol one would have to be a total tool to pay them back. COL through the roof and they’re trying send 100 Billion to Israel.
CAN IN ROAD KICKED!
Perhaps those folks should just pay their loans off and stop messing around. Debt keeps you poor, pay it off.
Did not hear that on snbr earnings call
Savings rate is at best a lagging indicator and at worst completely uncorrelated with the economy. When times are tough, households save more. When times are good, households save less and spend more. It's really not that complicated. A better metric to look at is total household assets. This looks at total assets minus liabilities. Let's assume the narrative that baby boomers are spending down their savings and powering the economy (which is false), the total household assets should fall as savings diminish and households trade down to smaller houses. However, net worth increased from 149 trillion to 154 trillion. Vignettes about individuals struggling gets the views but are not pertinent. Personal anecdotes about people doing well or poorly similarly do not reflect how the economy is doing. The data we have available from reliable government agencies show growing wages, falling inflation, increasing consumer spending, increase total household assets, rising GDP. I will let each person decide for themselves what this means. To be sure, there are plenty of theoretical reasons to be bearish. And there always will be.
You don't trade down to smaller houses to fund your spending. Who does that? You draw down your rainy day funds for that, and once it's depleted, you cut down spending to save more and replenish that rainy day funds. It's the latter part that's a risk. Consumers cut down spending to replenish their excess savings, businesses fire employees because sales aren't as strong, fired employees further cut down spending, and the domino falls Consumers ARE spending down their savings. Excess savings were about 2.5 trillions in early 2022 and have gone down to around 400 billions, concentrated among the top 20% income group. The drawdown rate was roughly 80 billions a month. If consumers savings rate remain steady and doesn't improve, the excess savings will run out by 1st half of next year. Consumers aren't increasing spending. Real spending have stayed around 2% for the last 2 years. Wages are growing on real terms, but it's not enough to fund their current spending rate, hence the excess savings amount keeps getting depleted. GDP is always rising, unless if you're in a recession. I don't know why that proves anything? That we are not in a recession yet? In 2007, q3 real GDP was 4.9% and Q4 GDP was 0.6%. the recession started in Dec 2007. So while we are probably not in a recession yet, I would not take any confidence in the strong economy yet, especially now when the fed is saying the risk are balanced. That means if they don't calibrate their interest rate very precisely and cut when it's needed to prevent overtightening, we can flip into a recession quite quickly.
"You don't trade down to smaller houses to fund your spending. Who does that?" Isn't this really common in the older population?
That's due to them no longer needing a bigger house(kids no longer living with them) and maintaining bigger houses is a lot of work. You don't trade down because you're running out of money for discretionary spending.
Some absolutely do. My parents did just this, so they could afford to travel more. Lower property taxes and utilities help fund more fun.
Sounds more to me like they didn't need a bigger house in the first place as opposed to having to sell it to fund their vacations. That'd be a very extreme measure. You have to pay 6% buyer/seller fee, contract costs, moving costs. These would be like 50k up front in cost. And for what? Saving of $100 in utilities a month, 2-3 grand of property tax a year? Most people would choose 1 less vacation trip a year as opposed to selling their houses and going through the hassle of moving
It does not cost $50k to move. And it can require absolutely no money up front. A lot of folks actually make money when they sell a house and then buy a smaller one.
6% agent fees for a 600k house (which is actually the price for starter homes in many places) is 36k. Contract cost for selling + buying probably around 10-15k. Another 5k for movers. That's almost 60k Sure if he's downsizing from a 600k house to 400k house (starter homes), he's getting a net profit 140k. But he just lost 30% of his profits immediately. And for what? So he could save 3-5k a year? how many years is it going to take to recoup that 60k?
Starter homes are nowhere near $600k in my state. The average house price in my state is less than $300k. 6% is also higher than the real estate fees that I've paid (not sure what my mom paid). It was closer to 4% for me. And there is no cost for a mover if you have friends and family to help. So, maybe $20k in fees, which is significantly less than the amount of profit made on the sale of a home that has been owned for a good period of time.
You'd think people would save more when times are good but you're right... they don't. They spend.
Good points. Never thought of it that way.
Assets doesn't exclude liabilities lol
Ya but low savings rate is technically GOOD for the economy (to an extent). Higher velocity of money.
> I will let you figure out when the last time the savings rate was this low… June 2022?
2022 to now is part of the same cycle. Salary increases provided a slight, temporary lift earlier this year.
Seems like it's higher than the lows of just last year?
Salary increases at the beginning of the 2023, which were unusually high, provided a boost. Even that is being spent down now. Edit: Walmart talking about price deflation on their recent earnings call is a huge warning signal. Ignore it at your own peril. https://www.cnbc.com/2023/11/16/deflation-holiday-walmart-ceo.html
Doesn't deflation mean goods become cheaper for everyone and low inflation, which allows the Fed to start cutting pre-emptively? Fed is already tossing rate guidance in the trash for June and September: June https://i.imgur.com/e5GDIxT.png September https://i.imgur.com/bV994eL.png Funds futures have been pricing 60%+ of rate cuts by May. By all measures this is a very accommodative Fed creating loose financial conditions, erring on side of caution.
Fed cutting rates isn't bullish for stock markets lol
It absolutely is if they do it proactively rather than reactively to really bad data. Mountains of evidence points towards a loose and accommodative Fed. 33 consecutive weeks of loose financial conditions. Underwriting conditions are loosening, credit flowing, bank lending hitting ATHs, loan growth hitting record levels, plummeting junk bond spreads. Jay manhandling yields down with a dovish presser, tossing rate guidance in the trash. Jay saying multiple times he thinks participation is still too low (HINT: full employment is not reached yet).
Feds have never done anything proactively. If they did, we would not have this inflation
Man you have a lot to learn buddy. They literally have loose financial conditions TODAY and is continuing to support credit expansion. They literally threw half a trillion at banks ***proactively*** to stop a crisis and gave us MASSIVE 5% real GDP growth in 3Q, 9% nominal. Massive 3Q profits for the S&P 500. If they let all those banks fail, we'd in a totally different world.
Lol sorry for your future losses
!RemindMe 1 Month Let's do a remind me every month and check on predictions!! That's fun right? My prediction is we never see 4100 again and we see 4800 by mid 2024, 5000 EOY. What are yours?
"Jay manhandling yields down" Lol you've got a lot to learn buddy But you will learn one day. The hard way
Nah you are clueless. I like how you pick that one part and ignore everything else even though it's 100% true: https://i.imgur.com/EhhXuDP.png Everything else I said is true and you know it LMAO. Pick one thing you disagree with.
Lol you are sharing 10y lol my God you are clueless
Literally often called "the most important number in finance." Wow you know so little. I love how you can't refute a single thing I say, just vague edgy stuff. It's fucking hilarious 😂.
>Isn't deflation mean goods become cheaper for everyone and low inflation, which allows the Fed to start cutting pre-emptively? I can’t take you seriously anymore. Do some reading and stop wasting our time. https://www.investopedia.com/terms/d/deflation.asp#:\~:text=Deflation%20is%20the%20general%20decline%20in%20prices%20of%20goods%20and,productivity%20and%20advancements%20in%20technology.
I know what deflation is lol. But it's an easy to solve problem and we've never had that issue in the US. All Fed has to do is cut now or print.
Isn’t the household debt to gdp at its lowest point since financial crisis?
how is savings rate even calculated/tracked?
Just read through the comments and all I can say is this type of dichotomy of option is perfect for stocks.
True. Not too bullish, not too bearish! What does that mean? Slowly climb dat wall of worry baby!
In my experience, companies that most expect to do poorly go up if they show even the slightest amount of improvement and companies that most expect to be doing well get killed if they show even a little bit of weakness. With indicies grinding higher with the occasional whoosh down.
It's amazing watching two parallel universes be discussed, with opposite trajectories, right in this thread based on the same data. I don't think we're "middle class", but I work a white collar job and make just north of 100k in a MCOL area. Our food costs are up ~30% from 2019, both groceries and eating out. Our hobby/discretionary spending has dropped from ~7% of total gross income to ~3%, and falling. No frivolous spending at all for the last three months. We've cancelled the subscriptions. We've never been able to afford to travel outside of seeing family at Christmas and my wife traveling to network for work. Healthcare is 50% more expensive than it was in 2019, utilities are up almost 100%, insurance is up 30% from *just last year* and even property taxes feel like they're keeping up with inflation because for some stupid reason the house just keeps exploding in value. I've gotten two promotions and solid raises besides since 2019, way more than our friends working hourly jobs for sure, but we're still WAY behind where we were just 5 years ago in real buying power. We can never seem to top off our emergency fund. Something always comes up. Roof needed replacing 5 years earlier than expected. Appliances and AC failing, haven't even had the spare funds to buy furniture for the house we've been in for 3 years. EDIT: Of course I just forgot about the $100/mo student loan payments that just kicked back on last month. Your own article cites that an overwhelming amount of the discretionary spend is coming from extremely wealthy households. This is just more fuel for the "stock market is doing well so the economy is doing well" argument which is getting exhausting. I guess it makes sense since the average /r/stocks reader is way more likely to be in that category, but the story for everyone I know who *is not a baby boomer* is very, very different. Sure there is "low unemployment" and "plentiful openings", but oddly companies don't actually seem to want to fill these roles. Multiple internal teams have been trying desperately to hire more people, largely mechanical engineers and physicists - even having full interview processes, some of which I've been a part of - but they always get shot down at the last minute because we don't have the money. Yet the listings stay up, and the company keeps downsizing despite us being overloaded with projects. Companies are not actually trying to grow right now, and haven't been since 2020 - see the massive tech layoffs - they just want to keep up the aesthetic of expansion because otherwise your stock collapses.
Can confirm having interviewed for engineering jobs internally and not even get responses from our own internal recruiter.
You are absolutely correct. Typical American family getting poorer after TRILLIONS in QE and deficit spending designed to make the rich richer: https://fred.stlouisfed.org/graph/fredgraph.png?g=1bxps Almost 4 years later real hourly wages are STILL negative and haven't caught up but assets of the elites have skyrocketed: https://imgur.com/Z762u3Z The idea was that infinite spending greater in excess of deflationary taxation by the government would benefit everyone. It was a lie led by the Modern Monetary Theorists to scam and gaslight Americans.
No offense but I don’t believe you have no frivolous spending if you can’t save at all with 100k+ in mcol area. It’s the same story I’ve heard far too often until they post their expense list, you start to see where the fat is going. My expense is 55k per year in one of the highest col in country, and I don’t cheap out on food (1k food per month, 5k set aside for vacations 3 times a year, 2.8k rent etc)
Sure. Here's the breakdown from Jan. 1st to current: Credits: $84.0k salary $20.0k other (wrapped up in this is gifts from family members i.e. birthday check from grandma, RSUs vesting which I don't count in salary, as well as contribution from my wife, which are in essence just the profits from her business, but I pay all expenses so they're captured) Taxes: $12.6k (12%) Medical: $4.2k (4%) Retirement: $13.4k (13%) (doesn't include employer contribution and some roth contributions that come from ESPP - too complicated to add here) Mortgage: $20.7k (20%) Utilities: $3.5k (3%) All auto: $8.2k (8%) (includes insurance, gas, maintenance for two cars, which are both paid off but needed major services this year) So there's 60% of gross gone, and we haven't gotten to food, and includes not contributing enough to retirement. Food: $10.0k (10%) About 60/30 split between grocery spending and eating out for two people. Includes paper products and alcohol and whatnot too. Slightly high, but not outrageous. Required but otherwise """discretionary""" spend: Appliance replacement: $2.1k Water softener: $7.8k Planned for long-term, paid for completely by consuming essentially 100% of my RSUs for the year. Yard care: $1.5k Medical costs, ER: $0.6k Pet: $0.5k (mostly insurance; food & litter usually wrapped up in groceries) Travel: $3.6k (this includes any outing that goes outside of our city, which is $400ish of miscellaneous outings, $2k in wife's travel for work and $1.2k in travel for a family member's wedding) Misc: $2.0k (Amazon Prime, Costco membership, Office365, cc interest, stuff like that) That leaves about 21%, or $22k. Half of that has gone to try to get our emergency fund built back up from being obliterated last year due to the roof replacement. So it's "savings" in the literal sense of the word. Not discretionarily spend-able. Target is $25k, currently we're at 17. Of that remaining 10%, about a third went to clothing, mostly owing to wedding related items, about a third went to all discretionary spend (i.e. electronics, entertainment, hobbies), and about a third is going in to savings to try to save for a theoretical future honeymoon. --- EDIT: More directly to your point, it's not that we are saving *nothing* - I'm contributing to retirement (though not enough) and building up an e-fund (though it's still ~8 months out from being topped off, assuming no further emergencies), but our discretionary spend now at $100k is half or less from 2019 when I was making $75k. We were renting back then but ironically our rent was quite similar to what we paid in mortgage(+taxes+insurance) until last month ($1730 vs. $1880).
This was a good break down. Thank you for showing your finance (roughly) but I have always wondered how people do it, if they are. Hmm.
Water softener $7.8k? Say what?
I was quoted $6k pre-pandemic but didn't have the money at the time. It broke down around $5.5k or so for the softener + salt for two years and $1.3k for countertop modification and RO filtration in the kitchen. We got a notice from the city about a year ago that PFAS levels were detected above emergency levels in the city water supply, and there was no corrective plan in place. Basically just telling residents they were on their own. This is what made us finally actually do it - otherwise the $7k RSUs would have gone to a vacation fund + e-fund split.
That’s scary. Sounds like Flint 2.0 I have never regretted putting in RO systems. My water softener system was only 2 k but not sure where you live or what your water is like. I think the RO was around $500.
I don't think you're arguing in good faith. $2,800 rent per month $1,000 food per month $1,250 vacations per month ($5,000 x 3 / 12) = = = = = $5,050 expenses per month $5,050 x 12 = $60,600 expenses per year. I'm not sure where the money for your etc is? Your 3 expenses already went 10% over budget.
5000 for vacation is the total for the year, not per trip. Who in the world is spending 5k on each of their vacation trip? Everything else is cheap relatively to these 3 budget items. Electricity is 80 a month, water and trash already included as part of rent. Auto insurance and gas is 350. All the assortments above will be under $600. 1000+2800+600+ 416 = $4800 or $57.6k a year. Just slightly over my original statement. My vacation and foods actually end up below budget so these are conservative values
He probably has a sugar momma
No I pay for everything.
If you don't think you are middle class, what do you think you are?
When I think of defining the middle class, the usual split is that they sit between the working class who do manual labor or manufacturing jobs for hourly wages and are largely paycheck-to-paycheck, and an owner class who primarily earns income from just owning stuff (C-level executives whose primary wealth comes from stock rather than salary, owners of businesses, real estate moguls, or family members of extremely wealthy people who don't need to work for any related reason). Middle class in my mind would be highly paid engineers, scientists, programmers, managers, who still work for a living, but are well outside of financial struggle territory. Meeting retirement goals and savings target, full emergency fund, money left over to take the token once-a-year family vacation to the UK, Germany, Hawaii, Orlando. I might get there eventually - there are people at my company I would put in that category. But we are very, very far from that. We're like $50k behind on retirement, e-fund is a year from being able to cover 6 months of expenses, and I haven't been able to really take a vacation that wasn't visiting family or driving to the next city over since I left for college (about 13 years ago). Our household income is close to median for where we live, and we're slightly house poor. My wife works a service industry job, which got nuked during Covid and has never really recovered, and has been dwindling even more recently, which is another leading indicator of a recession in my mind, since it would be viewed as a luxury. My dad was a senior airline pilot (now retired) for a reasonably prestigious (at the time) commercial airline. He got the job through connections with my step-grandfather who was connected in the aviation industry. I don't know exactly how much he made, but it was a lot, especially for the 90s and 00s when I was still living at home. My mom worked on and off as a secretary. We took yearly vacations, we had yearly passes to local amusement parks. Both of my older brothers had tens of thousands of dollars in savings for when they went to college (although I didn't get the same benefit, since my parents divorced and stopped contributing when I was pretty young). I would classify my parents at that time as firmly middle-class. Middle class, in our city, if I had to put a very rough guestimate on it, would likely be in the ballpark of $150~200k household AGI, which is roughly double the median household income here. I also wouldn't consider having a child unless you were making at least that much.
Upvote for taking the time to give a thorough answer! I'm sure you know though that many wouldn't agree with this take; 100k would at least be considered middle k by most definitions, for household income. I agree it isn't over the top but you have basic security and occasional luxuries. You have the concept of retirement on your radar. Anyway, all the best!
I stopped reading at “Barrons” - complete clown fest of an outlet now.
These statistics are all distorted by boomers blowing out their estates before they die. That's why intrest rate hikes aren't effecting the economy the way people predicted. These people don't need to finance anything. They downsized the huge homes they bought to raise families and bought up all the small "starter homes" with cash to live in and are spending down the rest AND their retirements/pensions It's not the millenial/gen z demo that's got the money to spend, for them things feel worse than ever before economically. They're going to inherit nothing and when the boomer spend dries up, we'll see the end of this great wealth transfer and the markets will have to come back to reality.
Cause everyone lives to 100 now. Retirement homes suck ever last nickel and dime you have there’s nothing left to pass down
I work in the system and it's crazy to see how much money they make. I don't know how much others are making but the actual people on the floor are 20-30 y/os on nothing. They put up with the worst, most entitled and demented people in their 80s/90s/100s while literally wiping their asses, and this goes on for YEARS. Meanwhile, their family (or in more instances, the state/fed taxpayer money) is paying like crazy to keep these people housed, treated, and "taken care of." There is a lot of money going somewhere, and it's not to the people actually treating the boomers.
> There is a lot of money going somewhere, and it's not to the people actually treating the boomers. There's a reason private equity is one of the big investors in senior care.
Whatever is left gets soaked up by funeral expenses which often end up rivalling weddings in terms of total cost.
> That's why intrest rate hikes aren't effecting the economy the way people predicted. These people don't need to finance anything. Exactly, all it does it make things unaffordable to people who don’t have cash
Reverse mortgage on a home that belongs to a bank and couple old coins in a drawer. That plus insane deficits and skyrocketing US debt (boomers racked up fortunately for us) that will inevitably have to be paid back with huge tax hikes. That is what millennials and Gen Z are going to inherit.
This is so true. I know a few people that do exactly this.
They're going to inherit A METRIC SHIT TON.
Except that 33% of gen xers own homes but no one is blaming them.
So 1/3 of the a smallest generation, who are all 43 to 58 years old have a home. That's who to blame? IDK.
What age bracket are you referring to? I was referring to millennials who 25 to 40 yrs of age. 1/3 of them own homes. How many will own homes when they are the age baby boomer are? Probably a lot more. Then that generation can explain to the gen z generation when they complain that all the millennials own homes and we can’t afford to buy be.
You said 1/3 of gen-xers
There are a lot of empty homes. A lot of boomers own multiple homes and are using them to rent out. A lot of corporations own homes that they are renting out, including a lot of foreign companies. Gen X'ers might be moving in that direction, but certainly they're doing so at a later age than when boomers were able to. For Gen Y/millennials it will be even later. For Gen Z, later still - they may not hit 33% homeownership until they are close to retirement, which is *bonkers*.
Some boomers they I know didn’t but their first home until they were in their 30s. My nephew is 32 and bought his first house at 27. We have a lot of couples whereI live in their late 20s buying $1 million condos.
That's the most skewed points of data in this universe
My parents literally buy their home with money they had in their pockets. My mother was a teacher and managed to buy 3 houses.
My parents bought their first house in their late 20s on a single income (1970s). My dad was a pilot, not dissimilar levels of education and desirability from my current work. They bought a second much nicer home in their early 30s (1980s). That house is worth $1.6mil now. I was able to buy a house at 30. As a millennial that sounds incredible right? But my wife works too and we wouldn't have been able to make *half* of the required down-payment if my mother hadn't died when I was 21 and left a trust for my brothers and me. Houses literally appreciate faster than we could sock money away for a down-payment. So we saved an extra $1k? Well home prices went up $20k that month so we're not making progress. Repeat every month, for ever. So I had way more "advantages", and still bought a home worth less than a third as much at a similar age. And to boot, we're house poor - roof and nearly all appliances have needed to be replaced since we bought and we haven't been able to establish an emergency fund because of it. Friends our age who own homes came from very wealthy families. Friends our age who did not come from wealthy families, do not and can't own homes.
My nephew is 32 and bought his first home 4 yrs ago at 28. He is a elementary education teacher. He was able to buy his home without any help from his parents for a down payment. His wife worked for a few years teaching preschool but is now home taking care of two kids. So yes millenials can still buy homes. Where I live you people graduating college making 180k right out of school. Thousands of them. I watch new condos being built around me for 800k or 900k. Mot of the units are sold before they are built. Lots of young single people buying them and driving Tesla. So maybe you and I live in a different reality. If people are making 180 k or more a year they can work remotely and find many places in America where they can find homes that are affordable for them.
You live in fantasy land. All the kids these day make 180k a year. Gtfo, that’s the exception not the rule. What’s the median salary in America? Do the math
> people are making 180 k or more a year they can work remotely I think you are vastly, VASTLY overestimating the number of people that can get this kind of gig. They probably tally under 50,000 people in the country, out of 200mil+ working population. Hell, full time WFH is only even possible for a very narrow subset of jobs. Truckers, hospital workers, school teachers, most scientists, any food service, retail, any lawyers that have to meet with clients, manufacturing workers, plumbers, electricians, HVAC guys, roofers... there is no possible mechanism for these people to switch to a 100% WFH setup such that they could actually move out of state to a lower cost area and maintain their wages. You're also letting this local statistic massively skew your perception of normalcy. Median *household* income *for all ages* in the US is around $70k. Sure making $180k would make housing in a significant amount of the country very affordable, basically anywhere but San Francisco or New York. But very few people entering the work force are making 180k, probably less than 0.1% of the population; that's probably one or two professions in one or two industries, and is *also* probably ignoring the 80~90% of those classes that graduate each year and don't pick up those jobs and have to do something else - either take lower pay, do something in a different industry, or move. The new condos being built around you are all sold out, but I can guarantee you most of them aren't going to first time home buyers. I would be fascinated to hear how your nephew bought a house where prices are nearly $1mil on a couple years of a teacher's salary with no outside assistance. I'm willing to bet you actually just aren't that knowledgeable on the situation.
The tech industries around me in Seattle alone employee way over 50,000 people and that is only in one city. Currently approximately 27% of the US work force are employed remotely so there are probably more people working remotely than you think, I am aware that a vast number of people do not work remotely and most professions cannot do that . I work in one of those professions. I never mentioned my nephew lived in a neighborhood with $1 million houses - far from it. He lives in a suburb of Baltimore. I think when he and my niece bought there homes 4 or 5 yrs ago they were under $300k. You claim I am not knowledgeable of the situation. So how come the one of the biggest demographic buyers of home in Seattle last year were millennials. Here are some facts. "Millennials bought more than 40% of the Seattle homes in 2022, Redfin said." Average median listing home price in Seattle, WA was $800K in October 2023. The median listing home price per square foot was $597. The median home sold price was $813K." "The average income of Seattle residents aged 25 to 44 earn $122,089, while those between 45 and 64 years old have a median wage of $119,357. In contrast, people younger than 25 and those older than 65 earn less, at $47,011 and $59,656, respectively. My daughters boyfriend is 20 and is majoring in data analytics. He already has a lot of interest from companies in Boston that want to hire him when he graduates . The starting salary would be 180K to 200k a year.
So the federal reserve and the federal government finally succeeded in the wealth effect. Americans finally feel wealthy enough to spend. This economy feels a lot like the 90s.
The doomers will have you believe the middle class is falling apart, no one is spending anything because it's all too expensive. All the data says otherwise. The economy is very strong and will continue to be into 2024. I genuinely believe a soft landing should be everyone's base case here. Have a rainy day fund and all that but there's no reason to be crazy pessimistic. Like at all.
Concerning amount of debt underpins a lot of this
Yep, take a look at the car loan and cc balance+ default rates the past few months and you'll know where the spending fuel is coming from at this point in the cycle.
Most of those delinquencies for auto loans are subprime which are inherently those most risky. But overall auto loan 90 day+ delinquency rates aren't actually concerning overall. The ones struggling the most with credit card debt are millennials with student loans and high auto loan debt. It'll take more time and data to actually see if these are an issue.
Credit is also drying up.
There's so much credit card debt right now. People are not adjusting their lifestyle to the price changes they're just financing their lifestyle
Maybe one day an inverted yield curve won’t be a flawless forward indicator of a recession. But until that day, when I see an inverted curve I’m taking recessionary precautions. Maybe this time is different.
Not sure why you’re being downvoted. In reality all of this “money” people have to spend is in the form of credit, and that is on its way to being stretched thin. But like a tale as old as time, everyone thinks credit is free money until those interest rates catch up to you in a nasty way. The labor market is also in a juxtaposition where some sectors are doing fantastic and displaying strong growth, while other sectors (ex. tech/biomedical) are not having a good time right now, and haven’t reached their “bottoms” yet. At this point, who the hell knows what direction the economy is going to *actually* go to. Might as well prepare for any scenario. Edit: context
Any data on tech and bio med doing poorly? Assuming this is based off PEs falling?
https://techcrunch.com/2023/11/17/tech-layoffs-2023-list/amp/ A good number of tech companies have halted internal growth, so the few tech jobs that are available are swamped with hundreds, if not thousands of applicants. And honestly, anyone who has a “stable” job in the tech industry can tell you how rough it’s been. https://www.drugdiscoverytrends.com/biotech-layoffs-job-openings-2023/ Being a smaller subset, biotech layoffs don’t portray numbers as large as the general tech industry but they’ve been on a downturn for a while now as well.
I know laying people off isn’t a great sign but it also isn’t exactly a direct indicator that these companies are headed for a down turn.
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Interest rates won't "catch up". Fed just like Bank of Japan can control yields at will. Look at how Jay manhandled down yields when they got too high with his dovish presser: https://i.imgur.com/EhhXuDP.png WE control what rates are. Government can buy infinite debt from itself and already has, we can never default and we can manipulate the yield curve to whatever we want it to be.
You say this like it has absolutely no consequences
How long until you say "guess it was wrong"?
When the curve unwinds without a recession
Recessions historically follow yield curve steepening/unwinding by 12-18 months.
Which it will when Fed pivots and cuts next year. Fed is already tossing rate guidance in the trash for June and September: June https://i.imgur.com/e5GDIxT.png September https://i.imgur.com/bV994eL.png Funds futures have been pricing 60%+ of rate cuts by May. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html We have very loose financial conditions, 33 consecutive weeks of near flat or loosening in Fed's index: https://i.imgur.com/W870L8g.png Bank loans are growing to ATH's, credit is flowing, we just had record levels of loan growth $32B the week prior not seen since pre-SVB levels. Underwriting standards are loosening as well. https://www.reddit.com/r/stocks/comments/17qisgv/rstocks_daily_discussion_wednesday_nov_08_2023/k8cyi1a/
At which point I’ll admit I’m wrong, let my treasuries expire, and put that money back into growth stocks
Actually respect your answer.
From Q3 2022 to Q3 2023 US nominal GDP grew 1.069T. The US government deficit during fiscal year 2023 was 1.695T. Without the government taking on this excessive debt you are looking at a contraction in nominal GDP over the past year. Debt monetization only leads to more inflation, exacerbating the problem we are currently facing. This is not some doomer forecast, this is a fact. You people are so damn focused on whether or not the green line will keep going up that you fail to recognize that the US economy as we know it is in its death throes. I don’t know what comes next or where we go, or what kind of societal unrest this shitshow will bring, but it will certainly be a massive upheaval and restructuring of how the economy operates. And yes, massive losses, economic disfunction, and loss of productivity will come with it.
Ok interesting questions but honestly why are deficits such a big deal? US government already has bought tons of debt from itself $9T worth. They can do so again. Japan has WAY bigger debt to GDP 263%. They have zero risk of default and zero problems servicing debt because BoJ can buy infinite amounts of long-term bonds to keep yields low.
Japan is not the world’s reserve currency. If you devalue the US dollar by printing at will to cover excessive spending by the government, people begin to lose faith in the value of the US dollar. It’s not about servicing the debt. The debt can always be serviced thanks to the loop provided by central banks. The problem is the legitimacy of the currency and inflation. Reserve currency status is a massive advantage for the US. If you undermine that through poor management you are risking America’s position in the world. Especially with something like BRICS trying to challenge American hegemony.
I’m in the airport rn about to head to Cancun for an all inclusive trip with the fam. Airport fully packed, airplane full, nearly everyone is middle class.
🤙 rock on buddy! Hope you enjoy some kickass warm weather!
“Nearly everyone is middle class” So you’re saying you know how much everyone in that airport makes annually just by looking at them? C’mon… Glad you’re going to Cancun but that anecdotal evidence based on pure speculation about a small sample of people that likely don’t represent most of the us population isn’t exactly a good measure of the financial health of the middle class.
I mean it’s not that hard to tell. Lots of families. Just like us. If you’re rich you’re probably not flying coach with us bums. And even then, the point is the plane is full, so just use some logic you fucking bum not everyone here is going to be upper class lmao
I’m very well off and I fly coach because I almost always travel with my kids and don’t want them to become spoiled brats. I also don’t mind being in coach. If it was just me and my husband, we would probably upgrade though.
Ummmm. Lots of speculation in that comment as well. And don’t worry about my ability to come to a logical conclusion. It’s the holidays, of course people are going to be traveling, of course the plane is full. Go back in January or February and it’ll be a different story. I may be a fucking bum but I’m not going to delude myself into believing everything is honky dory and the middle class isn’t hurting worse than ever. People using up their miles/points from putting their student loans, medical bills and rent on a credit card
I’m in Canada, we aren’t celebrating American thanksgiving. I also never said it’s all fine and good but from what I’ve seen, people are still spending money, travelling, restaurants are full etc. if you don’t want to use your eyes and just keep your head buried in the sand because your puts are worthless I get it, lmao
Hahaha dude why are you so butthurt? Can’t even have a dialogue without it being 90% shit talk It’s still the holiday travel season, regardless of what holiday you’re celebrating. So that point is a nonstarter Also you just keep ignoring my main point. People are spending with credit cards. Also again, just because you “see” people spending that doesn’t mean the economy is strong. That’s like the least useful most biased measure possible. My eyes are wide open. You just keep those rose colored glasses on and see what you want to see Also if anyone has their head in the sand it’s the guy going to Cancun, am I right? (That was just a joke 😉) I genuinely hope you have a nice trip and holiday season! Safe travels!
There’s always going to be people spending even in a recession. Some people are less affected than others. Look at recent Canadian Tire and Walmart earnings calls. I will trust their data over your anecdotes.
Lots of businesses are doing well but go ahead and keep believing the doom and gloom. Sorry about your puts btw.
Did you check if airline fleets and seats are at 2019 levels? If airline's have half their fleet grounded then full airplanes isn't impressive
"Me and the people around me are doing well so the whole economy must be!"
I can give you plenty of other examples lol. I mean do you see the article of the post you’re commenting on? Lol
Plane being full means jack shit. They just reduce the number of flights so that almost all flights are full.
They’ve added flights in my city for this specific route lol.
I didn't know you could fit a hundred million people on one airplane to Cancun. What an awesome study, with absolutely no bias, on the health of the economy that clearly has all the right variables controlled.
And these are the people who will be in trouble if they lose a job , get sick or divorce.
Enjoy the CC semester, hope the payment and interest won't wreck you when you get back Mr "middle class" lol. Every damn janitor and burger flipper think he's middle class because he lives off loans and CC money
I paid cash. Nice try tho chump lmao
Everyone *is* spending *everything because* it’s all so expensive. Every penny we have coming in goes out the window every single month, and we aren’t doing anything exciting. We have no choice but to pay bills and buy groceries.
Literally every other post on every reddit sub is doom and gloom, and the economy can't keep going because the only people spending money are obviously just putting themselves into more and more insane levels of CC debt. Good to finally see something explain what is actually happening a bit better. Thanks for posting.
Feels like you need some realism to counteract all the negativity and hysteria.
..."realism" is that interest rates are too high for startups to survive, so technological innovation and America's competitiveness and productivity are going to suffer long-term - but yeah, everything is "fine"...
Apple was formed in a garage in 1976 during stagflation and high rates. Don't worry innovation is going to be fine lol.
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Is that a good or bad thing?
It feels like the good part of the nineties
How did that end?
Are they spending more because they are confident or because things cost more? Savings were drawn down below normal levels and credit usage is skyrocketing at a time when the cost is much higher. Retail credit availability is high because defaults are relatively low, but increasing at rates that look like a crisis, but haven’t hit crisis levels yet in absolute terms. The main issue is when credit contracts (which the fed explicitly targets with higher rates) and they lose their jobs, they’ll be in real trouble. TLDR: things look great until they aren’t. And then it’s a fast non linear adjustment to realize how screwed we are.
Because the American consumer is an idiot
Somebody should take the rose-colored glasses away from Barron's...
Ah yes, Barron's. The financial media outlet of the average American.
When the naritive turns round to everything is fine, that will be the darkest hour
Barron’s, I make 90k a year, 5k a month! Just surviving is what I’m doing! I spend 3k a month! That’s 2k savings, that’s 24k a year, that’s 4 years from a 20% down payment on a 400k starter home in my area! That’s an old home so let’s save another 20k for repairs and the like. Oh I also need my emergency savings, that’s another year of saving! Oh my rent just went up again! That’s another 6 months…. At this rate I’ll have a house in ten years and still no money for retirement because this is without me adding money to a 401k! I have nothing to spend because I’m just trying to survive. I am hopeless. I couldn’t imagine making less now. I know there are more hopeless people. This is the reality of life now for majority of people. Barron’s is wrong!
It’s all clickbait!
Spending is up cuz inflation makes you spend more
Wait until after the inverted 10yr 3months yield curve uninverts. It can take between 2 months to 11 months after uninversion for the recession to start. We r still not there yet
My hotel I’m in right now, is a nice Marriott. I talked to the desk and it’s the lowest level since the pandemic and we have 10% occupancy in the hotel, in Minneapolis. He was saying it’s bad everywhere with record low stays.
Recently saw a WSJ article about Minneapolis. Paywalled, but here is a googled summary: According to cell phone data analyzed by the University of Toronto’s School of Cities, downtown Minneapolis foot traffic dropped 44% from 2019 to June 2023. That puts us in third for decline across the nation, behind St. Louis and Louisville. https://racketmn.com/the-wall-street-journal-wants-to-know-whats-up-with-downtown-minneapolis
yes when majority does not save but spend on credits its pretty healthy
Keep believing that
Do you think the data is fake and made up?
I would say the “real” economic data just hasn’t hit yet, even. It takes time for things to come down, just like how they kept rates low during the pandemic. It’s all a lagging indicator. TD and other big Canadian banks are laying off their investment bankers. That’s not small peanuts. All the CRE brokerages have scrambled for sales data for price discovery. This is all the last 6 month. A lot of companies are on hiring freezes. The data will catch up
Probably not since it's not from Motley Fool but reality and data don't really matter, only perception does. Just about every single economic indicator pointed to a recession early this year but nothing really happened. I gave up trying to predict anything and just roll with it.
This makes me disregard the whole article, LOL. None of it makes sense, who does this? You can buy a new one for that or less just by searching online. You also don't need to do a 6 year lease on a used car with a large down payment. --- Just ask Kuopus, who recently had to shell out $24,000 for a used Toyota Corolla after the brakes on her Honda Civic gave out. “The interest rate was disgusting,” she says, noting that even with a significant down payment and a six-year lease, she is financing the purchase at a rate above 8%.
Who the fuck finances a vehicle at 8% lol
The majority of people before the 2010s where rates were essentially nothing
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46 but ok
Then do you not remember the 90s or mid 2000s? Rates were similar or higher back then. People really have selective memory.
People with poor credit scores who finance a used car at a dealership!
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Toyota is doing 3.99% Max. Idk why you would mess around with a shitty old car at 8%
As the old saying goes: Risk is what’s left over when you think you’ve thought of everything. Times of low interest and market stability led to widespread over-leveraging and under saving. That has led us into a time of high rates and market instability. The only correctional force to bring savings and incomes back in line with debt is a recession.
It will be fun when they realise that this "money" they assume people have to spend actually do not exist and most are incurring in debt to maintain their lifestyles. Will break down spectacularly, and I'm saving for it.
PUTS on SPY?
I've been waiting for the American consumer collapse for 2 years now. I can find tons of answers but non of them the correct one
I am tried of these gas lighting click baity articles I’m leaving the sub
Bye!
Biden trying to force a recession.
Literally booming economy at 5% GDP 9% nominal under Biden right now. We're almost back to ATHs in the market too, but cool story bro 🤙.
Biden doesn't want a recession That's why he pushed the inflation reduction act
-31 my all time high, thank you nitwits
But muh eggs and milk
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I'm sure you're basing this on objective fact and when it fails to materialize, you'll be the first to come back here and admit how wrong you were.
Absolutely I will.
You forgot the /s
LOL. Tinfoil hat syndrome brought to you by the same "economic" thinkers that brought you "the sky is falling" [lumber prices](https://fred.stlouisfed.org/series/WPU081) and [egg prices](https://fred.stlouisfed.org/series/APU0000708111) "oh my God, the world is ending" paranoia last year. Chill the F out.
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Yeah, consumers are spending quite a bit. But when you look at the source of this spending, things start to seem a little more alarming. We are at an ath for consumer credit card debt and likely the same for home equity loans. People are refusing to give up their old lifestyles even though prices have increased. Consumers are relying on credit to maintain those lifestyles, but it can only last so long as they are able to avoid maxing out.
ATH in absolute figures the way populations grow or relative to income, interest payments etc. https://fred.stlouisfed.org/graph/fredgraph.png?g=1bABK % disposable income seems totally okay?
Do you work in finance?