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New Martenson Report Ready - The Great Asset Bubble

Sunday, February 15, 2009, 3:48 PM

A new Martenson Report is ready for subscribers.  It explores the connection between baby boomers, the stock market returns of the 1990's, bonds, and the trade deficit to make the claim that even if we somehow "fix" the economy here and now, significant headwinds probably remain that will prevent a full return to "how things were."

Here's part of the conclusion:

Most people cannot imagine a future any different from the present. For many people, the coming changes will bring unexpected shock, inconvenience, trauma, or worse. By thinking about these possibilities now and reshaping your expectations of the future, you will be far better prepared for the ride. Some people are already experiencing unexpected and perhaps unwelcome challenges in their lives due to the economic transition that is already beginning to play out. At this point, not many are expecting change to be imposed upon them, and even fewer have thought about where this change will carry them. But some have thought about it, and making even simple changes to how you think about the future can be...well, a sound investment.

Link to The Great Asset Bubble

Best,
Chris

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6 Comments

Denny Johnson's picture
Denny Johnson
Status: Gold Member (Offline)
Joined: Aug 13 2008
Posts: 348
Re: New Martenson Report Ready - The Great Asset Bubble

Thanks Chris, sure glad I'm a subscriber.

One question:

How are 'Savings' defined?

I am recently retired, have no savings accounts and keep a minimum in checking.
I view my physical precious metals and TDAmertrade accounts [mostly commodity etfs and PM miners; minimal money market, except between trades] as my 'savings' [if I owned, I would also count home equity as 'savings']......that which I will live from in the years ahead.
It's unclear, tho implied, that perhaps these assets would not show up in the referenced data as 'savings'.
The answer to this question doesn't really affect the validity of your msg, but could suggest skewed data.

I am curious.

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: New Martenson Report Ready - The Great Asset Bubble

Fantastic report, Chris!  I noted your future expectation is for debt relative to GDP to change to more reasonable levels; My take was that's not because we won't want or need to borrow massively but because we just won't be able to support present debt ratios in the future?  And debt destruction will occur by one or more of the only 3 possible ways you've noted elsewhere ?

In addition to the wealth effect causing an erosion in personal savings, my sense is a bunch more stuff appeared in the last 20 years that we could spend our money on and came to see as necessities.  I remember a time when no one had ipods, cell phones, personal computers, internet service, or even nice cars.  Plus, wasn't inflation eating more and more into the value of our earnings, such that a household was severly stressed when supported by only one income, and there was just less left over to save?  Or was it more that our earnings used to be supplemented by the wealth from the asset bubble, but we no longer have that stream to tap into?   

Whatever the original causes, the current debt promises clearly can't be met.

Tom

presentmoment's picture
presentmoment
Status: Bronze Member (Offline)
Joined: Sep 22 2008
Posts: 57
Re: New Martenson Report Ready - The Great Asset Bubble

Chris,

Thanks for sharing another excellent and insightful report!  What a relief it has been to find this site by chance and finally be able to contact people with some common sense, clarity and keen observations to see through all these propagandas, delusions and human emotions which seem to confound many of us to understand what seems to be really going on. 

Thanks again,

Presentmoment

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: New Martenson Report Ready - The Great Asset Bubble

Hello Denny:

I may have savings defined somewhere. I'm going to be interested in archiving it if I don't when CM or someone posts it. I recall it was a joke the way it was calculated, my memory is poor, but the words subtracted mortgage and living expense from income are popping up in it (my limited memory). Committed to total recall is "It ain't the savings in the bank." 

Take care 

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1028
Re: New Martenson Report Ready - The Great Asset Bubble

Denny, good question on what is "savings".  A quick search found this article (maybe someone can find something better)

http://www.heritage.org/Research/PoliticalPhilosophy/BG1185.cfm

This article indicates the government simply calculates savings as the difference between income and consumption.  The article suggests the true rate of savings is higher because that calculation neglects the the growth in financial and household assets.  But this article is dated 1998; now we know that houses and stocks were not as secure a form of savings as the babyboomers thought.  Now it is clicking with me what CM's report is getting at.  A false sense of savings from the rise in assets led to spending more and more on consumption and to a decline in true savings.

Tom

   

 

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5754
Re: New Martenson Report Ready - The Great Asset Bubble

Good questions and inquiry here. 

A point I attempted to make in the Crash Course chapter on Debt was that debt is relatively fixed (it does not fall in amount until and unless you pay it off) while assets are variable. The current housing mess is teaching this important distinction to millions of people right now.

The same principle can be applied to savings and income.  Savings can be thought of as relatively "fixed" in the sense that once money is stored away it just sits there, increasing by some percentage but eroding at the rate of inflation.  Income, however, is variable and can go up or down quite dramatically based one's personal fortunes.

Sometimes I see various think tanks or individuals try to equate savings with assets.  Usually these groups are quite vocal about that point when assets are rising and quiet as church mice when assets plummet.

But I do not see savings as being the same as assets.  One is a fixed expression of money, the other is a variable component of the economy.  They can appear quite similar during some periods, but quite dissimilar during others (such as now).  

For example, if we were to say that people were "saving" heavily during the run up in the stock market, would we say that they are now "dis-saving" when those assets fall in price?  I don't think this is a useful measure of savings and further this would make "savings" a volatile factor with a high degree of correlation ("beta") with asset markets and prices.

So saving and investing are treated differently in the official statistics and I agree with this approach. 

But, I suppose it is also true, that the amount of money that people could, on average, devote to investing in assets would be captured by the difference between money earned and money spent which is already the very definition of savings.  To count that difference and the amount put into asset investments would be a matter of double counting.

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