Way Ahead Of My Headlights; Idle Rambling; A Better Analysis Needed -- October 1, 2020

Re-posting from September 27, 2020:

Link here.

And yet, now ZeroHedge seems "anxious" about this: "Americans burned through a 'staggering' $724 billion in annualized savings in August as stimulus fades."

I don't know what "annualized" savings means. I assume "annualized" means amount of savings spent in August, then multiplied by 12, with fudge factors to take into account the month of Augut, but let's just do this:

$724 billion/ 12 months  / $12 trillion = 0.005 = .5%. 

So, instead of $12 trillion in savings deposits, there would be $12.06 trillion. And the math checks: 0.06 / 12 = 0.005 or 0.5%.

But look at this:

• personal spending came in above consensus expectations, rising 1.0%M (vs. consensus at 0.8%M), 
• with July downwardly revised by 40 basis points to 1.5%M (note the obfuscation: switching from "basis points" to "percent" in seven keystrokes. [A basis point is one-hundredth of one percent. Interestingly, the numbers above are rounded to tenths of a percent. I don't understand/know what it means, but it certainly doesn't get me excited. Maybe it should.]
• spending was driven by a 1.4%M increase in services spending, while durable goods spending rose by 0.9%M and spending on nondurable goods declined by 0.1%M.
  

From the linked article:

And here lies the problem: lower income coupled higher spending in a time when the vast majority of Americans were looking forward to more stimulus meant that US consumer rapidly burned through savings. According to the BEA, in August, the amount of annualized savings tumbled by $723 billion to $2.435 trillion, the lowest since March and far below the $6.4 trillion peak in annualized personal savings hit in April.

Now, maybe ZeroHedge can sort out this more recent article with the earlier article on record savings by Americans. 

I think it all has to do with "annualized." Whatever.

A reader suggests a lot of that $724 billion in "spending" had a lot to do with record homes sales in July and August. Record home sales are expected to continue through this month, October, 2020.

And, by the way, isn't that the purpose of savings? To get us through unexpected periods of turbulence? As long as folks aren't adding more debt to survive ....

... seems like we need a better analysis than what we are given. 

The fact that the US House doesn't feel the need for another stimulus at this point suggests things aren't so bad.

Back-of-the-envelope: 5 million homes sold in 2020; two million of these between July and October, down payments / cost of closing per home: $50,000 = $100 billion. That's a pretty good chunk of that $274 billion.