Personal Savings - Running on Empty

The plot thickens and it aint pretty. As noted in a recent post, consumer expectations for the economy are the lowest in 31 years. At the same time we see in retail sales reports that people are spending as if everything is hunky dory.  There is a very unusual and striking disconnect between consumer attitude and behavior. "I know things are ugly and going to get worse. Hey, check out at my new IPhone 4s. Cool, huh?!"


Well, now we can add another troubling piece. We are finding out that this robust spending is at the expense of personal savings (see chart below). 




The personal savings rate is now at it's lowest level since before the start of the financial crisis in 2008. As you can see, everyone tightened their financial belts for a few months and started saving more -- then gradually savings were chucked out the window. Now the savings rate is plunging. It's easy to predict that very soon there will be no personal savings to buy unnecessary stuff. Not exactly an encouraging picture for the economy at large.

Tap Dat A$$ET

Good candidate for official anthem of Occupy Wall Street. This one will get stuck in your head for the rest of the day. You are welcome.

Peak Consumer Schizophrenia

Typically when people feel positive about the economy in the near term, they go out and spend. On the other hand, if people's expectations for the economy are somewhat pessimistic, they normally cut back on spending. Makes sense.

 

Monthly economic reports show us that consumers confidence has been dropping rapidly and today's report shows that it is now at its lowest level since 1981 - over 3 decades ago. One could confidently assume then that people are cutting way back on spending. Not so fast. The opposite is happening. Retail sales are actually booming compared to last year.

Looking at the chart below, the high correlation between retail sales and consumer confidence is evident all the way until 2009. And then all of a sudden begins a sustained jaw dropping disconnect. We are spending as if we expect very good times ahead but our consensus expectations for the economy are at 31 year lows.

Can you say "peak consumer schizophrenia"?

Brent Cook - Top Picks

In less than a month, junior gold and silver mining companies continue to fall. GDXJ, a popular junior gold and silver mining ETF, is down a staggering 32%. Compare this to a 14% decrease in the price of gold for the same timeframe. For some it is now bargain hunting time in junior resource stocks - looking for gold nuggets in the rubble. 


In a recent interview on BNN, Brent Cook - a respected veteran geologist and junior resource stock newsletter writer - offers a few of his top picks and explains why he likes them.  To watch the 5 minute Top Picks video segment, click here.


One of Cook's top picks is Almaden Minerals (AAU), a prospect generator.

Almaden Minerals has "chances for a real home run out there in terms of a major discovery that someone buys. There are so few good sexy big systems and this is one of them." He is referring to Almaden's Ixtaca gold and silver project in Mexico. It was mentioned that Cook added to his position a little over $3.00. 

AAU closed today at $2.31. In full disclosure, I own AAU. Do your own due diligence.


The whole interview  is in 7 parts and well worth watching it in it's entirety.