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

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.


Raffie NotApplicable Thu, 11/16/2017 - 12:13 Permalink

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.

In reply to by NotApplicable

Inconsequential Raffie Thu, 11/16/2017 - 16:37 Permalink

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.

In reply to by Raffie

Endgame Napoleon NotApplicable Thu, 11/16/2017 - 17:31 Permalink

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.

In reply to by NotApplicable

pods Thu, 11/16/2017 - 11:46 Permalink

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.pods

Give Me Some Truth pods Thu, 11/16/2017 - 13:03 Permalink

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.

In reply to by pods

Endgame Napoleon pods Thu, 11/16/2017 - 17:36 Permalink

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.

In reply to by pods

NoDebt Thu, 11/16/2017 - 11:47 Permalink

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'. 

Endgame Napoleon LawsofPhysics Thu, 11/16/2017 - 17:43 Permalink

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.

In reply to by LawsofPhysics

Endgame Napoleon RagaMuffin Thu, 11/16/2017 - 17:49 Permalink

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.

In reply to by RagaMuffin

JibjeResearch Peacefulwarrior Thu, 11/16/2017 - 12:05 Permalink

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.

In reply to by Peacefulwarrior

hanekhw Thu, 11/16/2017 - 11:50 Permalink

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.

Give Me Some Truth jamesmmu Thu, 11/16/2017 - 12:55 Permalink

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.

In reply to by jamesmmu

itstippy Thu, 11/16/2017 - 12:14 Permalink

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'.

mendigo Thu, 11/16/2017 - 12:21 Permalink

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.

Codwell Thu, 11/16/2017 - 12:38 Permalink

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% .