Individuals are Getting Their Balance Sheets Healthy

The past year has served as a wake up call to individuals about the risk of too much debt. Many have reduced their spending and are now saving more. Frivolous spending has been replaced with saving. Cash is king and the “good ‘ole days” of living on borrowed money is over for now. People are getting their financial houses in order. The proof is in the statistics:

– As the chart above demonstrates, the personal savings rate has jumped in the last year as consumers hunkered down and stopped spending. Please keep in mind that this savings rate does not include any contributions to 401K plans.

– The increase in the savings rate equates to real savings. The above chart shows that total Personal Savings have jumped from approximately $150 billion in 2008 to over $500 billion today.

– Savings are up and debt is down. According to the Federal Reserve, credit card balances were down 9.5% in 2009 or slightly more than $91 billion and consumers now owe less than what they did at the end of 2006.

In 2002, after the collapse of Enron and MCI because of too much debt, corporations began to shore up their balance sheets by reducing their debt. Like 2002, we believe a sea change is occurring now within the US – spurned by the continued spending of our government. Such spending has created a large amount of anger in our citizens. If our politicians listen, this anger, we believe, will lead to the next wave of savings, namely, a much needed reduction in Government spending. All polls indicate that government spending is one of the major concerns of all our citizens – both Democrats and Republicans alike. We believe it will not be fashionable to “bring home the bacon” for politicians in the future. The free spending days of the Government are rapidly coming to an end.

Sincerely,

Your THOR Team