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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Seeker of Truth who wrote (35954)	7/10/2003 5:36:26 PM
From: Cogito Ergo Sum	Respond to of 74559

Hi Malcolm, As the population ages it does tend to save more I've never been sure of this one. I think it really should read tend to be more interested in wealth appreciation and protection which unfortunately now may mean risking it in the market.... I think conventional wisdom may have this wrongly interpreted ... Here (as you know) we roll our retirement plans into annuities (in a low interest environment ????) or Registered Retirement plans. Self directed ones can be chock full of all sorts of risky investments... Then again I'm probably just backwards ... saving now and planning to blow it all later :o) regards Kastel

To: Seeker of Truth who wrote (35954)	7/10/2003 6:59:00 PM
From: EL KABONG!!!	Respond to of 74559

Hi Malcolm, They show that consumer debt is at a record high and corporate debt is near the record high but is slightly receding. What causes the latter improvement? Bankruptcies. While it is true that there has been some bankruptcies in corporate America, and some of them quite spectacular and public, the improvement in corporate debt is largely attributable to other factors. One rather publicized factor has been the transfer of debt and other obligations from the balance sheet, such as pension obligations being passed on to the government. But the biggest debt reducer has been the liquidation of assets, and then using the proceeds from those assets to reduce debt. One other factor has been the act of renegotiating debt from higher interest rates to lower interest rates, which (for the most part) hasn't actually reduced the amount of indebtedness, but most certainly has reduced the amount of interest paid (think smaller quarterly debt payments). And the last factor (also well publicized) affecting corporate debt has been the reduction of total numbers of employees, which interprets into lower benefits payments, lower payrolls, lower payroll taxes, etcetera... (Arguably, this is a reduction in corporate expenses, true, but lower expenses frees up more cash flow for debt reduction, so it's a related factor.) I can't see an impressive rise in the market in the near future especially as the aging population is less risk inclined. Not necessarily true... Some, if not many, anxious, would-be retirees may very well try to play a risky game of catch-up by speculating in the markets within their tax-deferred retirement accounts. This phenomena is not unprecedented, as we witnessed it during the late '90s as many people tried to make up for years of under-contributing to their retirement accounts by making a one-time killing in the US markets on speculative stocks. This strategy failed then, and it could very well fail again... KJC

To: Seeker of Truth who wrote (35954)	7/10/2003 9:20:43 PM
From: energyplay	Read Replies (1) \| Respond to of 74559

Hi Malcolm - Thanks, but all the graphs & info come from BCA Research in Montreal, Canada. They do good stuff - very brief. Biggest flaw is they often use statistics and government numbers without looking behind them to the actual reality. Note that they did use debt of NON-financial companies - because financial companies can count debt multiple times. Wonder if they included GE as a non-financial company ? ;-) Many manufacturing & retail companies have finance arms now, which have both debt and matching assets, so the increase in debt could be a little exaggerated. Also of note on that graph - consumer debt was flat in the early 1980s, when interest rates were well over 10%. Smart consumers avoided debt at those rates. When rates went lower, debt increased, which was initially reasonable. You can sign up for an email from BCA research whcih comes weekly and has the latest graphs.