By
Tom Dyson, publisher, The Palm Beach Letter
Monday, October 19, 2009
"We've never seen this aggressive paying down of debt before," said a banker in the Financial Times last week. "Once you slap households in the face... it sticks."
Each month, the Federal Reserve calculates and reports the total amount of consumer credit outstanding in America. This is the money Americans have borrowed to pay for cars, vacations, education, and refrigerator-freezers at Wal-Mart.
When this number rises, it means credit is easy and Americans are in consumption mode. They're buying SUVs, houses, flat-screen TVs, granite countertops, and stainless-steel appliances. And they're borrowing money to make these purchases – often using credit cards – so they're not worried about finances.
When this number falls, Americans are in thrift mode. They prefer saving money and paying off debt to shopping at the mall and going on vacation.
Despite the improvement in the economy and the bounce in the stock market, the American desire to save money seems to be getting stronger...
In the last year, American consumers have reduced their outstanding debt by more than $100 billion, according to the Federal Reserve's data.
In July, Americans reduced their consumer debt by $21 billion... the sixth monthly decline in a row and the largest monthly drop in borrowing ever recorded.
The report for August came out earlier this month. It showed American consumers paid back another $12 billion of their outstanding credit, the seventh monthly decline in a row. At this rate, Americans will have paid off 13% of their outstanding credit-card balances by this time next year.
Not only are Americans paying off debt, but they're saving more money...
Each month, the St. Louis Fed publishes America's savings rate. This is the percentage of disposable income Americans choose not to spend.
In 2005, the personal savings rate fell to less than 1%. This year, it has averaged 4.1%. The last time it averaged more than 4% for the year was in 1998.
Here's the thing: While demand for cash in America soars, investors have been dumping it from their portfolios as if it were venom...
This year, cash has fallen...
60% in terms of Russian stocks
55% in terms of lead
53% in terms of coal
50% in terms of copper
40% in terms of Internet stocks
33% in terms of sugar
17% in terms of gold
16% in terms of the S&P
13% in terms of cotton
The terrible sentiment and Americans' new attitude toward saving make cash the most contrarian investment opportunity in America right now.
In tomorrow's essay, I'll show you one of my favorite ways to invest in cash...
Taking on debt is like getting a tattoo: It doesn't go away, and it's pretty painful to get rid of.
Money-Compounding Machines in India By Rahul SaraogiFriday, October 16, 2009
Most of our time is spent avoiding and ignoring the noise and excitement around us. A lot of people know the right thing to do but many of them are carried away by the noise and emotion around them.
The Federal Reserve Is Openly Telling You to Buy Gold and Silver By Porter StansberryThursday, October 15, 2009
At some point in the next few years, our creditors are going to stop believing in our ability to pay our debts in honest money. I don't know what will break first, but we can't go on printing money to prop up our banks and spending money we don't have to prop up our culture of entitlement.
What I Learned Inside the Vault By Dr. Steve SjuggerudWednesday, October 14, 2009
There are hundreds more stocks like CLCT out there... hundreds of microcap companies that have no brokerage-firm coverage selling for little more than cash in the bank. Yet they have legitimate cash flows from their businesses.
Two Ways to Profit on a Huge New Currency Trend By Tom DysonTuesday, October 13, 2009
While other central banks are considering raising rates, the Fed has so far refused to join the party. The dollar is the worst-performing major currency in the world this year as a result.
