Excellent post!
I believe that Americans should be better savers and I've taught my children that and try to influence my friends to do the same
I have been in a cash-heavy position for some months now, after betting heavily on momo stocks. So I guess that makes me a "saver" by default. However, I don't think my savings are a very productive use of capital for the economy as a whole. OTOH, it seems that the economy has been wasting too much capital these past few years (i.e., the asset bubble induced by the credit bubble), so perhaps capital preservation in such times can be deemed "constructive" in a way.
But look at Japan, that famous Nation of Savers. They have like $12 trillion in savings accounts at their post offices and such (the post offices are allowed to offer slightly better interest rates, I believe, but it is on the order of 1% after taxes). I know Japanese people around my age (34) whose entire "retirement plan" these past ten years has been to save as much as they can and let it build up in the bank. Never mind that the money is gaining 1% nominally, and declining in real terms. That is the plan, which seems unrealistic to me, unless you make a whole lotta money or plan to retire at age 80.
While the US market has become bloated due to speculative excess, I think what the Japanese have done is perhaps even worse. All that money collecting dust and nobody doing anything productive with it. I know the Japanese have many other problems with the capital structure of their banks and such, but I do think part of the problem is a lack of interest in risk investment of any sort on the part of the individual, coupled with insufficient means for channeling such capital to productive ventures (e.g., venture capital, and the requisite exit strategy [read "IPO"] for such risk capital).
I really don't mind if the Naz goes down to 500 (I will be happy and go bargain hunting). My greater concern is if we lose faith in the basic investing process in this country, whereby entrepreneurs with innovative ideas can find financing and bring those ideas to market. This is really a key element in the long term, despite all the obvious bubblemania and clowns that need to be taken to the woodshed.
Just some thoughts.
Cheers, MM |
