Monday, May 04, 2009
On this week's Connie Mack Show one of the guests was Robert Kessler, the guy who always says to buy long term treasuries. He is not one of my favorites but he made an interesting point about one aspect of the new normal. He said that back in the old days people stayed in houses for 15 years but that recently that number has come down to seven years. While I can't vouch for his numbers the trend makes sense. He said that the trend will now turn back around and go back toward 15 years.
In a similar context he said that people will drive cars for much longer than they have been accustomed of late. He talked about car sales dropping from about 12 million down to 9 million and while he said many people are expecting a rebound he is not.
There will be economic implications to this and so by extension there will be stock market implications as well assuming you agree with Kessler to some degree. Quantifying the future importance of these to segments the economy is probably impossible but both have been huge in terms jobs supplied and dollars spent. If these segments become a smaller source of jobs and attract less new spending there will be a meaningful long term drag on the US economy.
From a personal finance point of view being less aspirational, or more correctly spending less aspirational items, is a logical reaction to the type of economic event we are now working through. Anyone who is overleveraged or thinks they might be will be motivated to figure some place to cut back. This ties in directly with the idea of certain other countries moving up to their perception of the American lifestyle while the US tries to hang on to what it's got.
I tend to be optimistic where the future of American social fabric is concerned but do not expect any sort of persistent stock market leadership to come from the US, further I believe the realities of our debt situation and other problems (repeat theme coming here) make the case for generally higher interest rates and slower long term growth which means US based investors would need more foreign exposure for their investment portfolios.