Email to an investment partner:
“Dow 10,000. I may even lower my target. Funny that the Dow was over 13,000 just a couple months ago. I was saying to myself “sit tight this is crap and we are going lower.” I think I said to you that the January fallout was not nearly enough to clear out the excesses, and that we are going lower.
Consumer is in big trouble.
$4+ Gas prices
Lower home prices
Negative home equity
Major debt (Credit card debt is going to be a major problem - how many times have we said this)
No savings
Rising unemployment
The American consumer is going to have to completely change their habits. I predict that average consumers will have a lower standard of living in the next decade than they became use to during the past decade. As I said a couple years ago, “consumers were living beyond their means, and will have to start saving soon and reduce their spending.” With no savings and a massive wealth destruction of lower house and stock prices (combined with higher food and energy prices), average living standards are going to fall. My advise to the average consumer and to Congress is to tighten their belts, stop the unnecessary spending (waste), save and invest in the future. Not that hard, but for the average consumer and Congress it seems a Herculean task.
We have been running our lives and our country with no room for error (like a stock that is priced for perfection). As long as everything is good, people (and the country) were spending like bottomless pits. The problem was that lenders and the fed decided to feed the fire. Problem is that things are going bad and without room for error the economy is not going to be able to take it for long.”