The Great Consumer Crash of 2009

[SHELLY]

The Great Consumer Crash of 2009
by James Quinn August 19, 2008

James Quinn is senior director of strategic planning, the Wharton School, University of Pennsylvania.

?It is easy to ignore the storm if you look at the opposite horizon. When the storm reaches your location there can be no more ignorance.?

I hate to tell you, but the storm has reached your location and it is a Category 5 hurricane. The levees are leaking. Ignore it at your own peril. The 6,000 sq ft McMansion buying, BMW leasing, $5 Starbucks latte drinking, granite countertop upgrading, home equity borrowing days are coming to an end. The American consumer will not go without a fight. For the last seven years the American consumer has carried the weight of the world on its shoulders. This has been a heavy burden, but when you take steroids it doesn?t seem so heavy. The steroid of choice for the American consumer has been debt. We have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live above our means. It has been a fun ride, but the ride is over. We can?t get steroids from our dealer (banks) anymore.........http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098

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[ASH]

Great reading Shelly. Thank you. And right on par!

 

[goofer]

Pays to be a saver !!

 

[Andy A]

What a great post, Shelly, and much as I hate to say it, probably very correct and extremely prophetic. Hopefully, some of us will be able to ride out the storm that is on the way. Those who chose a lifestyle to which I am not accustomed probably will not. But never, fear, we WILL be asked to bail them out under the guise of "helping our fellow man".

 

[Mango]

Forbes Magazine says that financial advisers will be the job of the next decade. Here's hoping that means that saving and wealth management will be the new trend going forward. This country can't afford to continue like this.

 

[DD]

Well great. :shock:

Seriously, good post Shel.
And welcome back.

 

[dunefrog]

Ever notice how people are fascinated with extremes.

For a while, we saw a fascination with an extreme UPSIDE:

1. In the late 90s, tech stocks were going higher. It was "a new economy" and the Dow was "going to 30,000."

2. In the early 2000s, housing prices were going higher. "They ain't making anymore land," so buy anything the bank will let you.

Now we are seeing a fascination with an extreme DOWNSIDE:

1. Oil prices were going higher, so they surely will go still higher--to "at least $200 per barrel." We'll all be living like Mad Max in a few years.

2. The credit crisis, housing market, consumer debt load, etc. will create a "death spiral" or "negative feedback loop" or whatever. It's the end of the world as we know it.

Just as the two upside projections were wrong, so the two downside projections will be wrong in the long run. They both stem from the same deep psychology--that of a mind vacillating between hope and fear. We can't know the future, and some of us can't deal with that. Some people worry incessantly about what might happen. Some of this worry is good and helps us prepare for whatever may happen. But some of the worry does no good at all.

If it is true, as Shelly's prognosticator says, that there will be a great "consumer crash in 2009," there is nothing we can do to stop it now. But the sooner we stop whining, and moaning, and wringing our hands, the sooner we can start building a sustainable future for ourselves.

In Chinese, the word for Crisis and Opportunity is the same. They are two sides of the same coin. So take advantage of this "crisis" to do something positive--start a business, coach a child's sport's team, clean up a dilapidated building, tutor a high school dropout. Just stop the blaming and belly-aching. It's making me sick.

 

[SHELLY]

Just stop belly-aching. It's making me sick

 

[John R]

great read shelly, thanks. it's inevitable.

 

[Miss Kitty]

Were you a grasshopper or an ant?