I get very frustrated when I watch TV because of all the advertisements. I know, I should get Tivo or a DVR, but thus far I haven't.
A few weeks ago I decided to do something odd. I actually counted the minutes of ads while watching ABC's "Boston Legal". After I tallied the numbers I was shocked that 25 minutes of the hour long program were advertisements. This really frustrated me since I pay a fee to a cable company to watch my own TV, and then they waste 25 minutes of my time trying to sell me something during the show. Television is nothing more than a sales tool that has molded and shaped the minds and spending habits of consumers.
Then it hit me. Now I know why America has a zero savings rate, while the Chinese have a savings rate of 50%. Hence, my 4th quarter score above stands, Chinese 50%, the US 0%.
In Barron's (December 11, 2006, page 30), Al Hubbard, the assistant secretary to the president for economic policy told China's deputy finance minister, ““the Chinese need to move to a lower savings rate. It would both raise the standard of living and increase the quality of imports into China."
I would have loved to see the face of China's deputy finance minister after Hubbard made those comments. This is like taking financial advice from a person who (Lending Tree commercial) is "up to their eyeballs in debt".
Hubbard went on to say that while Bernanke and Paulsen are in China they "will talk about China's savings rate in the course of a major speech there to help drive home the need for a change." I'm surprised they didn't get laughed out of the room. Can you imagine the looks on the faces of the Chinese when they heard this?
The U.S. government and their average citizens are "up to their eyeballs in debt", and they are telling a country with a 50% savings rate that they should spend more. Ha Ha Ha. Pick me up off of the floor, Ha Ha Ha, give me a paper bag, I think I am hyperventilating, Ha Ha Ha.
In a June 2005 AC Nielsen survey, they found that “The U.S. is number one when it comes to the percentage of the population that claims to “have no spare cash.” In October 2004, AC Nielsen said, “Of U.S. consumers who do have spare cash, their first priority for that money continues to be debt repayment."
The US National Debt is currently $8,625,231,000. Almost daily we hear conflicting messages about our economy. On one hand we hear that the economy is strong and consumer spending is up. On the other hand, we hear that debt levels are too high and the consumer is tapped out. Which one do we believe? I believe both are accurate.
With the above information in mind, the Chinese know that America will never be the world's leaders when it comes to giving advice on savings.
The rapid credit growth that took place over the last six years have lead to massive credit excesses, and has fueled the current debacle in real estate. Cash-out refinancings were the key to the consumer spending boom that took place in 2005. Now that credit standards have tightened, where is the money going to come from to allow earnings to continue growing at their historic highs?
So, at the end of the 4th quarter, the savings rate remains, China 50%, the US 0%
** I will be giving an update on the Dynamic Growth portfolio this weekend. To access the newsletter all you have to do is establish a username and password to enter. This is a free trial, and will end on June 1, 2007.
