Consumers Are Both Confident And Broke - The Last Time This Happened...

Tyler Durden's picture

Authored by John Rubino via,

Elliott Wave International recently put together a chart (click here to watch the accompanying video) that illustrates a recurring theme of financial bubbles:

When good times have gone on for a sufficiently long time, people forget that it can be any other way and start behaving as if they’re bulletproof.


They stop saving, for instance, because they’ll always have their job and their stocks will always go up.

Then comes the inevitable bust.

On the following chart, this delusion and its aftermath are represented by the gap between consumer confidence (our sense of how good the next year is likely to be) and the saving rate (the portion of each paycheck we keep for a rainy day).

The bigger the gap the less realistic we are and the more likely to pay dearly for our hubris.

Where are we today?

Worse than in 2006 and nearly as bad as 1999.

Both of those years were followed by several really bad ones.

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Five Star's picture

and investors haven't been this confident since 2000...

Raffie's picture

EYES WIDE SHUT!!! Now run as fast as you can, nothing can stop you.

NotApplicable's picture

People stop saving because they don't have any fucking money left. Besides, where's the value of saving in ZIRP World?

Raffie's picture

Few reasons why people have no savings....

Also, many are trying to keep up with the Jones. Living way out of their cost of living. 

Buying the newest $70k suv since the low monthly payments and 96+mo to pay it off.

People are so poor now they can't shop at Walmart and are now shopping in the Dollar Store, but they will get a new CC and max it out and/or get hooked into PayDay Loans.

This Holiday Season will be interesting to see the numbers.

Inconsequential's picture

Ive heard the Dollar Store argument many times and haven't said anything. Do you guys remember when the DS started building smaller stores on the outskirts of towns? When they did that i wondered WTH are they doing? It was like the country store but a more modern rendition of it. I'm out in the middle of nowhere but if i get on the main road going in either direction the first store i hit is a Dollar General Store. I have to go MANY miles further to get to a wally world. So, guess where people get that gallon of milk or pack of cigs? Guess where the old lady goes instead of all the way into town? 

I do agree with the rest of what you are saying, but the DS model paid off for them and i don't have a problem with that.

Endgame Napoleon's picture

And when you get the rare occasion to save, as my ex and I did once in our little Main Street shop due to a bulk order of massive size and little variety that was perfect for getting volume discounts from distributors, you get almost zero interest on your savings. We saved quite a bit — thousands — for 2 years with about $50 in accumulated interest. Then we put most of it back into the shop.

chicmagnet's picture

My grandfather passed away over 10 years ago and left all of his grandchildren 30K all of my siblings couldn't spend it fast enough. I chose to put mine into a cd after 10+ years it's a whopping $31,500. The point is the government does not want savers it's wants the money in the market.

pods's picture

This time is completely different.  The common man is one paycheck away from disaster, but the radio said things are fine.

When they try and scare you with war, you know the bottom is about to drop out of the economy.


Peacefulwarrior's picture

They gotta move some bomb inventory to make room for the new bomb inventory just like any good retailer...

Give Me Some Truth's picture

Re: "The radio said things are fine ..."

 Cumulus Media is the 2nd largest owner of radio stations in America. Yesterday, a share of Cumulus stock was trading for 28 cents. 

If the economy was great, they would be selling a lot more commercials and maybe their company shares would be trading above a dollar.

Giant Meteor's picture

People are confident that they'll remain broke .. playing global three-card-monte, but for many it's the only game in  town ..

Endgame Napoleon's picture

Yep. And all the so-called journalists can talk about is sex gossip, possibly because they do not understand the underlying economic issues, but probably because they are bought and paid for by The Establishment. They may not care, but historians will take all of the foreboding evidence in plain sight on the internet and in academic studies, pointing out how these “elites” were just Neros, playing a yellow-journalism fiddle.

TeraByte's picture

They are stupid to do it without the government´s handouts.

NoDebt's picture

If the S&P dropped 40% from here it would still be over 1500.  A number that was eclipsed only as recently as late 2013.

I'm not sayin' nothin', I'm just sayin'.


LawsofPhysics's picture

Government pensions WILL be paid.

"Full Faith and Credit"

Endgame Napoleon's picture

People often make the argument that, since SS is a contract involving lifelong taxation, full faith and credit will be undermined, globally, if the government does not fulfill its side of the contract.

Here is the problem: Robots and computer programs are doing more of the work, making the argument that pay-per-birth welfare and child tax credits for citizens working part time due to automation-based underemployment and a flood of immigrants, likewise enjoying pay-per-birth freebies, will save SS.

It will only make the situation worse, adding more freebie absorbers, with the younger ones consuming 100% free, non-contributory welfare in many different forms, including through the tax code, for producing more humans to compete with non-SS-tax-paying robots for jobs.

RagaMuffin's picture

Damn, that's where I screwed up, I've never been a confident investor    ;-)

Endgame Napoleon's picture

Many people do not grow up with that. They are raised by government employees who make only the safest investments. After you have lived awhile, you see more inexpert, risk-friendly individuals get ahold of some money and lose it — all of it — thinking they were big investors. People can lose either way. They can lose by being too cautious and by being too incautious. People need to know their limitations.

Don Pancho's picture

They have been crushing Gold and Silver wayyy to much this year. 

And every time they do it becomes less effective. And were ignoring this thats why its going to hit us hard.

Peacefulwarrior's picture

Meanwhile, President Xi and his countrymen continue their campaign of buying the Gold and Silver...

JibjeResearch's picture

We have to understand that China has known the gold and silver markets for a very very long time.  This knowledge is their downfall.  Crytocurrency renders metal market obsolete.  When cars replace horses as the mean of transportation, crypto will do the same to silver and gold.

Currently we are at the 3rd generation of crypto.  The 4th gen crypto will bury gold and silver as a value holder medium.

presk_eel_pundit's picture

Yeah, it'll work until the first EMP.

runswithscissors's picture

Ask the people in Puerto Rico how much food they were able to buy with crypto after  the hurricane knocked out the power...

Nobody For President's picture

hahahahahahahah Yeah, it's different this time.


(Gasp, deep breath, gasp)

It Is Not Different This Time, 

or the last 2500 years or so.

Crypto is just the latest fad, and totally dependent on a computerized society.

Good luck with that.

dogsowar's picture

Wonder how fast current crypto's will last when quantum computing ramps up?

Also, which is easier to steal, $1Million in Gold or $1Million in crypto?

Just thinking out loud.

Give Me Some Truth's picture

The one thing "they" know they can control is the price of gold and silver. And so they do.

hanekhw's picture

Mass insanity can't be called 'mass' unless it really is 'mass' right?

It's NOT a new 'Gilded Age' and paper or electronic 0's and 1's aren't gold.

Ron_Mexico's picture

"The copies of gold and silver inflated
which after the theft were thrown into the lake,
at the discovery that all is exhausted and dissipated
All scrips and bonds will be wiped out."

 -- Nostradamus, Century 8, quatrain 28

jamesmmu's picture

holiday is upon us, how many will keep shopping till they default on their credit cards

Give Me Some Truth's picture

Re: How many of us will keep shopping until we default on all our credit cards?

 Good question. I don't know the answer. I'll hazzard this guess though: If there is a surge in shopping, it's going to be done on all those credit cards that are not quite maxed out yet. I bet the too-big-to-fail banks that back all those credit cards have got the memo - let the people spend.

PitBullsRule's picture

Do they have special welfare for Doom Porn writers?  Because there's going to be a lot of unemployed ones, like this guy, when the sky never falls.

FreeShitter's picture

This guy missed the memo....Janet has us tucked in warm and cuddly. She wont hurt us.

FreeShitter's picture

uncle powell then, dont matter new FRN boss, same as the last one....

Dead Indiana Sky's picture

PitBull always whining about "Doom Porn writers".........And posting a comment on every single article.

LawsofPhysics's picture

Well, you cannot spell eCONomy or CONfidence with the con.

"Full Faith and Credit"

same as it ever fucking was...

Bill of Rights's picture

Im neither broke or confident, but I am fucking fed up...

itstippy's picture

With Winter almost upon us I splurged and bought a whole new cold weather wardrobe.  Two 6-packs of merino wool socks ($30 ea.), three sets of thermal underwear ($13 ea.), three pairs of "Rustler" jeans ($12 ea.), a pair of Thorogood work boots ($200), a zippered hoodie for under my Grizzley coat ($16), and a quart of Sno Seal ($30).  With sales tax I've blown $400 on clothes in the past week.  

I'm broke but stylin'.

Ron_Mexico's picture

yup, a quart of Sno Seal ought to do it - if you live on Mt. Everest . . .

rkoen's picture

The sky has been falling for several years, yet it's still up there.

Scornd's picture

its a perspective thing. its only true for

mendigo's picture

When one lives in a socialist state there is no need to save as we will all be taken care of according to our needs. And after all the masses really only need rice and beans and a bandaid and a box.

Happily the people that matter (PTM) are doing quite well.

As they say:

They only money you make is the portion you keep.

aliens is here's picture

I only buy what I need. What I can live without I don't buy. There is only so much junk shyt I need.

rkoen's picture

worse than 2006?  2006 wasn't bad--it was 2008!

mb's picture

prior to HFT and PPT

Codwell's picture

Save for fucking who ?  The fucking banksters are paying you 1/2 of 1% interest and loaning it out on credit cards at 25% or student loans at 6% . And after factoring in inflation, you're actually losing money with it banked.

And will the money I've saved be there when I need it or will there be a bail in ?

Stash cash, gold and silver, and plead poverty when you lose your job and the economy collapses so you can live off the government welfare system.

Wtf, if you're wealthy enough to have enough surplus cash to last through a several years recession, you're part of the top 10% . 

DocBerg's picture

My bank pays me the princely rate of 0.05% on my savings account.  Since I don't need credit, I have no idea what they are charging for loans, but I'm sure that it is way abouve 0.05%.

Codwell's picture

And with an inflation rate .05% or higher you're actually losing money by having it in a savings account.

Give Me Some Truth's picture

American people - broke, no cash for emergencies, heavily in debt ... and more confident about the future than they have ever been!