This morning the latest consumer sentiment data shows US consumers–
still the relatively wealthiest consumers in the world –continue to feel
pessimistic about their economic future. Sure, there have been a couple
of hopeful spurts in early 2009 and 2011, but overall the chart below
attests that US consumers have labored in various degrees of depressed
sentiment since the heady euphoria of the late great secular bull in
2000.
No doubt, there are some bankers and other elites who wax mystified
at such trends. “Why in the world are the masses so gloomy?” they are
wondering. I have a suggestion: despite the appearance of some material
trappings, the masses are financially broke (physically too, but that’s
another story). And for the first decade since the last two
credit/housing busts in 1980 and 1990–they have come to know and feel
their vulnerability. They feel it in their lack of savings, lack of
cash flow, low to no home equity and lack of quick fixes. As shown in
this next chart, 60% of workers aged 55 and older have less than
$100,000 in liquid savings. Those under age 55 have much, much less.
Not only are people under-saved today, but the savings that they do
have has earned typically negative returns now over the past 15 years,
as stocks continue through a secular bear and interest rates have
plunged toward the zero bound. Add under-employment and record debt
levels to meager savings and we should fully comprehend why people are
feeling low. All the while, marketing media taunts at every moment,
about all the things we should want to consume.
There are important, life-changing lessons to be learned in all of
this. Lessons about the danger of debt, and the folly of high spending
rates. Lessons about the perils of ignoring this truth and placing
ignorant faith in the investment sales crowd who repeatedly promise that
they can magically make up for the client’s lack of savings and
spending controls by plopping any savings they do have into risk “plays”
at every price.
We see this today as we have seen it repeatedly since the late 90′s,
as desperate people buy over-priced risk for tenuous short term “yield”
in securities that are likely to come at a devastating cost to their
unsuspecting capital once more.
The bottom line is this: when we do not want to accept facts before
us and make prudent changes to our financial behavior as needed, then we
are destined to suffer repeated harm, unless and until we do. This
truth is timeless.
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Legendary gold trader Jim Sinclair sent subscribers a shocking and 
