It Won't Be Wages That Drive Next Round Of Inflation -- September 27, 2020

Updates

Later, 2:53 p.m. CDT:  It really is interesting the amount of money that slips through one's fingers. 

I haven't been to Starbucks since the "lock down" that began sometime back in March, 2020. Although there were exceptions, my weekly schedule was $3.00/day for Starbucks coffee, Monday through Friday, and it was not uncommon to add in one or two additional sessions over the weekend. So, on average, let's say $4 / day over 300 days = $1200. Or $100 / month. On top of that my wife and I would enjoy one sushi dinner each week, almost religiously, setting us back a meager $50/meal for two. Fifty weeks x $50 = $2,500. Barnes and Noble every Saturday, maybe Sunday, probably $20/weekend at Barnes and Noble, 50 x $20 = $1000. Which reminds me, I won't be renewing our Barnes and Noble card ($25) and we won't be renewing our Ft Worth fine arts museum membership, $75. Gasoline is down to about $20/month. No typo. 

Later, 2:45 p.m. CDT: it's amazing  how much free time one has on the weekend when there is no sports to watch. The college football airings are a joke. 

The NFL is not much better. Speaking of which, NASCAR today? Hard to say, but apparently from Las Vegas, starting about 6:15 p.m. CDT. I will miss the start. I will be over at Sophia's house.

Generally speaking, of those "required" to wear a mask along the sidelines, most are wearing their masks below their noses.

Original Post

Blog post suggested by a reader. A huge "thank you."

Link here.

Before the pandemic, total savings deposits had risen significantly under the Trump administration, from around $8 trillion to $10 trillion (a 25% increase). But think about this: during the pandemic, Americans actually increased the total amount in savings by another 20 percent. The "buzz" in the mainstream media was that a lot of Americans were pulling money from savings to stay "afloat." There's no question that's accurate, but the "big picture" suggests something else.

So, were Americans simply moving money from the stock market to savings accounts. Just prior to the pandemic and even during the pandemic, the three major US equity indices hit all-time highs. During a recession. 

Back of the envelope: ($12 trillion - $8 trillion) / 350 million = $12,000 per US citizen.

This is what is wrong with that "thought." In fact, one can estimate 50% of Americans (pick whatever number you want) don't have any savings at all.

Therefore, disposable income that could hit the retail market might be:

• ($12 trillion / $8 trillion) / 150 million = $27,000 / per resident with the wherewithal to spend.

For an average family of two, that equals close to $60,000 per family. 

Now, add this bit of trivia: the baby boomers are now aged between 54 - 76 years of age. Retirees can begin withdrawing funds from their retirement accounts at age 59, and must start taking distributions no later than age 72. You can do the math. 

Japan has long been considered the queen of savings:

By the way, where will a lot of folks "put their" RMDs? Yup, right back into the stock market. 

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

***************************