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International Savings Rates Bode Ill for US Markets
Often while searching for a piece of data through Google (see above) I stumble across something else which is far more interesting. That is how I found the table below of international savings rates.
Why should you care? Because countries with high savings rates tend to have strong economies and great stock markets, since there is plenty of excess cash available to pour into investments. Those with low savings rates suffer from weak economies and poor stock markets, because of a shortage of available capital.
When the American savings rate dropped below zero in the latter part of the last decade, it set off emergency alarms for me that a collapse of the financial markets was on the horizon. During the last four decades, I have watched Japan’s savings rates plunge from 16% to 2.8%, and you know the result for markets there. When it approaches zero, that will be the time to short the JGB’s, the yen, and the Nikkei stock index.
The only country that doesn’t fit this analysis is Australia, with a mere 2.5% savings rate, but boasts a positively virile stock market and currency. Perhaps the resource boom there is skewing things? Perhaps the end is near?
By the way, the outlook for the US, with its still miserable 3.9% savings rate, does not look great when considering this benchmark. Don’t expect a runaway bull market anywhere savings rates are low and rising.
What are savings rates telling us are the best countries in which to invest? China, 38% (click here for my last China interview at http://www.madhedgefundtrader.com/july-19-2010-jim-trippon.html ), India, 34.7%, and Turkey, 19.5% (click here for “Turkey is Popping Up on my Radar” at http://www.madhedgefundtrader.com/july-23-2010.html ).
Australia – 2.5%
Japan – 2.8%
USA – 3.9%
Brazil – 6.8%
Britain – 7.0%
Germany – 11.7%
Ireland – 12.3%
Switzerland – 14.3%
Turkey - 19.5%
India – 34.7%
China – 38%
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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The Mad Hedge Fund Trader should lay off the cheezies when he pumps this "corn".
It's nice that he travels in such rarified company yet always has time for the "little guy". It's good that after all he has accomplished he can rest easy at night knowing he has given the best advice possible to those who "dog paddle" in shark infested waters.
Someone should write a song about him. Possibly a statue or painting could be commissioned to capture the impact the Mad Hedge Fund Trader has had on all our lives.
another stuffed suit who's in love with the sound of his own voice; takes up too much space; should be cancelled.
I can't take it anymore. MHFT posts should come with a public health warning.
Savings = Investment + (Govt Spending - Taxes) + Net Exports
What do that list of countries with high savings rates all have in common? What would the impact be on those export driven economies if consumption in the US declined due to increased savings rates?
Or, could it be that US citizens know that a dollar "saved" is a banker's pocket change and it ain't ever coming back to you?
How does MHFT generate alpha with these types of get rich quick schemes?
Another knucklehead MHFT post. Sigh.
Interesting SP500 chart ...
http://stockmarket618.wordpress.com
Not sure what the composition of Australia's saving rate is but since they have compulsory superannuation (so you don't end up paying for the bum down the street to retire) of 9% of salary (+employer comp), I think that tells you exactly where the strength in their markets comes from.
That however, is clearly going to be influenced by population growth and demographics so look for the Aussie miracle to fall off the spar at the point where both become less favourable.
Jeez - don't you know this crap anyway, everyone knows the superfunds prop up the aussie market.
I don't understand why MHFT gets free advertising space on ZH ? He runs an entertainment business selling comic books called "investment newsletter"; the posts are utterly worthless.