Question of the Week

Do we own too much stuff, or are Americans tapped out? Feel free to elaborate.

Too Much Stuff
Broke as a Skunk

Maybe it’s a gut feeling based more on a lack of confidence in the economy and a very dramatic race for the White house; maybe it’s concerns about the Fed hiking rates.  Maybe its general worries; selling begets selling that further begets more selling.

Coming into the week, investors were selling equities hand over fist.  In fact, according to Investment Company Institute (ICI), there were outflows of $13.4 billion in equity exchange-traded funds (ETFs) and $3.0 billion in Funds.  Altogether, the past five weeks before this week saw more than $50.0 billion in equity outflows.

Fund Flows ETFs	May 4	Jun 27	Jun 20	Jun 13	Jun 6
Total	-13,397	-3,179	-4,143	-3,464	-622
Domestic	-12,858	-1,296	-3,283	-2,525	-261
World	-539	-1,903	-860	-938	-3611

Fund Flows Funds	May 4	Jun 27	Jun 20	Jun 13	Jun 6
Total	-3,008	-8,122	-3,931	-4,632	-5,836
Domestic	-2,359	-8,681	-3,145	-4,327	-5,281
World	-649	-2,441	-785	-306	-555

I think people are fooling themselves if they think this market is reacting to good news, even if retail sales and consumer confidence are much better than expected.  There is an uncertainty that’s never really gone away throughout the entire recovery; it just becomes more pervasive from time to time.

Key Support

The Dow Jones Industrial Average closed right at its 50-day moving average on Friday. The inability to hold leaves the index vulnerable to its 200-day moving average of 17,292 and the next support thereafter is 17,000.

Too Much Stuff

The big news of last week was the spike in U.S. Retail Sales, but which chart is more reflective of the state of the U.S. economy? Is it the sales numbers or J.C. Penney (JCP) that was hailed as a savior ready to reconquer the world months ago?

A Closer Look

Retail Sales Over Past Year	Change
Overall	+3.0%
Motor Vehicles	+3.1%
Furniture	+3.6%
Electronics	-2.0%
Garden Supplies	+8.2%
Groceries	+2.0%
Gas Stations	-9.4%
Clothes	+1.3%
Sporting Goods	+4.2%
Department Stores	-1.7%
Internet	+10.2%
Restaurants	+5.2%
US Census Bureau

As I look around my house from time to time, I feel as though we have too much stuff.  In fact, I am embarrassed at how many televisions we have in the house.  I could go without new clothes for years, but my tailor is working on three new suits right now.

And we have so many electronic gadgets in the house that I am still trying to figure how to operate stuff in the junk drawer (which is more like a closet these days) that’s functional,  but obsolete because it’s a couple of years old.

I don’t think my home is unique in that regard- as a nation; we have a lot of stuff and don’t need any more for now.

When the latest retail sales report was released, it came in better-than-expected, but it also reflects some of the angst in the stock market.  The Internet is on fire; it looks as though we are buying clothes as a replacement decision more than keeping up with the latest looks.

In addition, we are sprucing up the house by buying new furniture and fixing the garden (my wife and daughter have been making an amazing garden in our backyard dedicated to my Mother). However, fewer people want to make that trip to the mall, especially when it comes to department stores.

And we are taking gas savings to local restaurants.

The problem with these trends is that a lot of people work in those brick-and-mortar malls and department stores.  As creative destruction takes full control of the retail process, I am sure many malls will morph into distribution centers or even housing communities.  (There’s a Bloomingdale’s near me that would be the ultimate house.)

Make no mistake, consumers are hoarding money for a variety of reasons, and we are living more for the moment in order to enjoy things such as our homes.

Today’s Session

Equity futures have been indecisive all morning long as the market begins the session with more questions than answers.

Crude is higher on a Goldman call for $50.00 and Apple higher on news Warren Buffet bought $1.0 billion worth of stock.  Let’s keep an eye on the NASDAQ composite, which failed last week to get back above its 50-day moving average.  The big upside test is 4820.

 

 

 

Comments

The 90% are broke. It would be interesting to see who is doing the buying, the top 10%, or everybody. Gauging the health of the economy based on consumer spending can give a false impression of "good times". Do the internet sales include stores that are brick and mortar, and have online sales? (Eg: Walmart, Barnes & Noble, Costco, Target, Kohls, etc.) Growing up in a frugal household with two public school teachers as parents in the 60's and 70's, who themselves were children during the Great USA Bankruptcy of 1933 (aka the Depression Era), there is a tendency to be a pack rat. I still can hear Mom and Dad say: "Don't throw that out, it's still good, or we might need it for something else some day". People may have too much stuff, but that just means it's time for spring cleaning. Even in your prosperous community, Charles, there are plenty of needy people close by who could use the donations. If I get new clothes, I donate an equal number or more to charity (a big shoe purge is the next project). Don't feel guilty about your fancy tailored suits; you need them to look spiffy on FBN! Those old electronics can probably be recycled for precious metals too. The survey answer if not as clear; folks are truly not keeping income up with their life overhead, but many still have too much stuff. I've seen plenty of people in the news who are on welfare, living in trailer parks, with huge flat screen TV's that take up half their living room, even if their junker is up on blocks, and somehow always have money for cigarettes too! I'm just glad I have a nine year buffer to catch an improvement in the investments over time. (Still going to grab lottery tickets every now and then, though.) Daria Schooler (DoctorObvious) on 5/16/2016 8:40:10 AM

We definitely have too much stuff in our house. I can't even blame my wife - most of it is mine! sigh. As to how is everyone affording it, well, credit cards, though we pay ours off every month, and have savings. Compared to most of America we haven't technically overspent, but I've sure bought more than I "need". Mike H on 5/16/2016 10:08:30 AM

Maybe the reason that people have glutted themselves with "stuff" is that they have lost their fear of failure. There are always welfare benefits to which you can avail yourself and your family if there is a downturn. People laugh at saving for a rainy day. Some day this safety net is not going to be there. z on 5/16/2016 10:42:39 AM

Most of us probably are holding a lot more stuff than we need and at the same time, I am concerned about how much useful stuff I have that is considered "too old". My kids laugh at me because I'm a total tech geek but I'm also still using an Iphone4 which was a hand-me-down from my daughter last year. I can't throw it away - it still works fine. I don't want to surf the internet on a cellphone anyway. There's way too many still working cellphones in our landfill today. This is an environmental disaster. My parents grew up in the 30s and really knew the meaning of "conservation" far better than the group of enviro-nazis we have in this country today....they used and re-used everything, true recyclers. My goal for this year is to slim down - anything that I haven't touched in my garage for two years, has got to go-unless its some special heirloom. I'm only purchasing what I need this year too.... Doug on 5/16/2016 10:53:45 AM

Here in the midwest/southwest (Houston) we're seeing continuing effects of the crash of the Oil Patch. People are being laid off, taking serious cuts in pay just to keep a job, or starting to think about retiring offshore to make the meager savings stretch, and those are the people with a job. At the same time the generosity of people here is still high, with large sums of money coming to charities supporting the flood victims, and volunteer groups working to help people salvage what they can. Mostly, after the Memorial day floods of last year, you don't hear too much about FEMA helping people, they've learned their lessons. A lot fewer people believe in Gov "Help." Where are we going? I don't know, but I can tell you car sales are off - big time! Trucks are being bought, but only the ones who need them for work are buying them. It seems people are finding work that pays, it pays less, but it pays something. The money saved by buying on eBay and Amazon is being used for the meals eaten out, which means that after that nothing or little is left. Watch the defaults on auto leases, that will be the bellwether on consumer credit. Those big regular chunks of money hit the budget hardest. Fiat - Chrysler leases along with GM are going to tell the story. Steve on 5/16/2016 11:02:40 AM

Too much stuff, too little time, and a million messages a day teasing us into acquiring even more. Meanwhile, a good part of the world is going hungry or dying for lack of clean water to drink. But even more challenging is the spiritual poverty of a nation that prefers celebrity over genuine character in its choice of leaders. And the apathy of a nation that stands silently by while a million of its own future citizens are aborted each year. I visited a dying friend yesterday who was there for me in the most critical time of my life, and I was able to thank him for being one of the most Christ-like people I have ever known. Friendships like that are pure spiritual gold and worth more than all the stuff in the world. I am blessed to have known him. Dennis Howard on 5/16/2016 11:05:21 AM

My wife and I have taken to Spring Cleaning every time we attempt to find room in our house for ANYTHING, so we host (Uggh) annual garage sales...and I have noticed the neighbor down the street carts a large trailer behind HIS "truck" traveling from garage sale to garage sale...collecting only the BEST items...and then HE sells those items at HIS garage sale (quite cleaver and ingenious, if you ask ME, as he has created a "cottage industry" out of OTHER peoples over abundances...i.e., "one man's JUNK is another man's TREASURE." MY parents lived thru the Great Depression and repaired EVERYTHING, rather than throw it away. It was known as "resourcefulness" in those days and it's SAD to see that our Millennials have NO IDEA what that term means. James Allan on 5/16/2016 1:28:54 PM

I'm broke as a skunk because I own too much stuff! LOL Peter on 5/16/2016 1:31:49 PM

It's BOTH! Too much stuff AND broke (becuase of buying too much stuff)! The Depression-era seniors saved everything due to previous experience of "want", the new generations buy everything because of the "immediate gratification" impulse and lack of historical experience. kev on 5/16/2016 3:02:21 PM

Without a doubt, our society suffers from too much emphasis on stuff and not enough on time and relationships. But, our society also elected Obama because he promised to buy the votes with stuff, and we have a slate of candidates this year that are also a strong indication that our society has not matured at all from electing the big Zero. I think the problem with sales is more with the vendors than the buyers. I believe buyers have been cheated with such crap for long enough that they are getting wiser. But, the businesses are lagging behind and actually lowering quality thinking they can cheat their customers and not lose them. Time Warner Cable is a great example. They are running ads now that emphasize how extremely awful their service and product have been and how they are begging those who left them to give them another chance. Meanwhile, their ads claim competitive, fair pricing without forcing you to buy what you don't need, but only if you buy a bundle of stuff you don't want or need, and then the price only holds for 12 months before the quietly double it. Lousy quality, prevaricating sales tactics, and no respect for their victims. Their only winning point is that their competitors are trying to be even worse. The whole industry is like so many others where lying about your product quality has replaced producing a quality product. Consumers are getting fed up and slow to spend in such a vulgar business environment. The internet has made it worse since the consumer is hit by so many more vendors with no good way to tell the scum from the few honest ones. Bob G on 5/16/2016 3:13:59 PM

The established set who have good jobs (28-55 yr olds) probably do have too much stuff but, when you look at the total portion of households who have the means and desire to own stuff the picture is more bleak. Until we get a lot more people in the work force with decent jobs buying things, not just paying off debt, we will not see the Consumer Driven Economy rebound and drive the market higher. We have 10 Million baby Boomers retiring and they are not buy that much new stuff. They are traveling, eating out and paying themselves from their investment and savings. There is a lot that needs to be fixed structurally but, I have NO faith in the Federal Bureaucracy, current administration, Central Banking cartel or Congress to do the things that would begin righting our rudderless ship of State. Gary L. Reynolds on 5/16/2016 3:27:17 PM

Materialism isn't very nurturing. Patricia Flynn on 5/16/2016 4:27:11 PM

Never heard the term, "Broke as a skunk." Is it made-up ? Sue Perman on 5/30/2016 12:34:23 AM

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