More Americans are focused on cutting back their spending to save more

More Americans are focused on cutting back their spending to save more

More than a few times, we here at Tematica have talked about the rising level of consumer debt across student and auto loans as well as credit cards. We’ve also talked about how older Americans are undersaved for retirement and how the upward trajectory in interest rates is going to make debt servicing more costly, crimping disposable income. In thematic speak that’s Middle-Class Squeeze with a helping of Aging of the Population.

But new data suggests consumers are aware of their situation and that is prompting them to cut back on their spending in order to save more. What we’ll have to see in the coming monthly Personal Income & Spending reports is to what degree they are opting to save vs. spend. In recent months, we’ve seen the personal savings rate reported by the Bureau of Economic Analysis slip to 3.6% in August from 6.9% in April, which took a minor bite out of personal spending.

If we see a more pronounced level of spending, it could be a headwind to an economy that is reliant on the consumer to open his or her wallet and spend. The silver lining if that comes about is those companies that we’ve identified as riding our Middle-Class Squeeze investing theme are likely to see a more favorable tailwind.


A new Bankrate survey finds that 66 percent of Americans are limiting their spending each month. Among those who are curbing their spending, 36 percent are doing so to save more money (24 percent of all respondents).

With more than 60 percent of Americans unable to cover a $1,000 emergency with savings, it’s good news that some are willing to sacrifice to start building cushions for the future.

Americans aren’t just limiting their spending to save: 24 percent of people who are limiting their spending are doing so because their income hasn’t changed, while 17 percent said they have too much debt. Another 11 percent are worried about the economy, and 5 percent are worried about the economy.

Households with incomes of $50,000 per year or more were more likely to say they needed to limit their spending to save. These households were also more likely to report being frugal, on a budget or having no desire to spend more money. They were less likely to cite stagnant income than households with income under $50,000 per year.

Meanwhile, households with income under $30,000 per year had the highest likelihood (13 percent) of citing their worries about the economy as the top reason for limiting spending.

… older Americans aren’t showing the same dedication to saving. Stagnant income was the top response for baby boomers (34 percent) and the Silent Generation (49 percent).

For a generation that is still working, flat-lining wages brings concern. In 2017, the labor force of Americans ages 55 and up accounted for about 23 percent of the average annual labor force. By 2024, the Bureau of Labor Statistics estimates that percentage will increase to almost 25 percent.

Source: Survey: Two-Thirds Of Americans Are Limiting Their Spending — Here’s Why |

The SEC is calling for better controls as cyber scams grow

The SEC is calling for better controls as cyber scams grow

We’re not one to make lite of any fines assessed by the Securities Exchange Commission (SEC) or any corporate losses, but among the pain identified from an SEC investigation showed there is much room for improvement when it comes to identifying malicious cyber attacks even ones as simple as those found in an email. Should the SEC get its collective back up over cyber attacks given that investors rely on a company’s internal controls, and find companies are being lax in their security, we could see the SEC step in and issue fines to foster better corporate behavior. That would add another catalyst for cybersecurity spending, bolstering our Safety & Security investing theme in the process.

Another proof point that threats to one’s safety and security are being had in a variety of new and different ways.

Public companies that are easy targets of cyber scams could be in violation of accounting rules that call for firms to safeguard assets, the Securities and Exchange Commission said.

The SEC said in an investigative report that nine public companies wired nearly $100 million to hackers who impersonated corporate executives or vendors using emails. One company made 14 wire payments to a hacker, resulting in more than $45 million in losses, the SEC said.

“Cyber frauds are a pervasive, significant, and growing threat to all companies, including our public companies,” SEC Chairman Jay Clayton said in a statement. “Investors rely on our public issuers to put in place, monitor, and update internal accounting controls that appropriately address these threats.”

The type of scam the companies faced, known as business email compromises, have been responsible for more than $5 billion in losses since 2013 and ranked last year as the top cause of estimated losses linked to any cybercrime, the SEC said, citing data from the Federal Bureau of Investigation.

The investigation signaled regulators’ increased scrutiny of companies’ efforts to protect against cyber scams and whether intrusions are made easier due to poor compliance.

Company executives and boards have been grappling with cybersecurity issues long before the latest prodding from the SEC, said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “Can anyone at this point figure out how to appropriately deal with this issue? That’s the difficulty of this whole area,” he said. “You are dealing with criminals. This is something that boards are dealing with,” he said.

Not all companies that fall for cyber scams are guilty of having lax safeguards, the report said. “What is clear, however, is that internal accounting controls may need to be reassessed in light of emerging risk.”

Source: SEC Calls for Better Accounting Controls as Cyber Scams Increase – WSJ

Used-car sales poised to climb as new cars become even more expensive

Used-car sales poised to climb as new cars become even more expensive

Since the Great Recession, we’ve seen new auto sales rebound due in part to the attractive if not aggressive low to no interest financing. That’s helped mask the rising cost of buying a new car as original equipment manufacturers (OEMs) ranging from Ford and General Motors to Volkswagen and Honda have packed connective technology and features associated with our Digital Lifestyle investing theme their vehicles.

Over the last few quarters, the Federal Reserve has hiked interest rates and is poised to do some four more times in the coming 15 months according to its most recent economic forecast. At the margin, that will boost the cost of buying a new car or truck, and likely increase the demand for used cars for consumers that are seeing their discretionary dollars shrink as those same interest rates drive their existing debt servicing costs higher. Good news for companies like Carmax that can cater to Middle-class Squeeze consumers, not so good for the auto manufacturers.


Demand for used cars was unusually strong this summer and will remain at elevated levels through the year’s end as higher interest rates and rising prices on new cars continue to stretch buyers’ wallets, industry analysts said.

Used-car buyers are finding a growing selection of low-mileage vehicles that are only a few years old.

While used-car values have also increased in recent years, the gap between the price of a new and preowned car has also widened and is now at one of its largest points in more than a decade, according to car-shopping website

New-car prices have steadily climbed in the years following the recession as companies packed vehicles with more expensive technology and buyers shifted away from lower-priced cars to bigger and more expensive sport-utility vehicles and trucks. The average price paid for a car hit an all-time high of $36,848 in December of 2017 and remains at near-record levels, according to

With nearly 40 million in sales last year, the used-car market is more than double the size of the new-car business.

The shift in demand is a troubling sign for auto makers, which will be under pressure to deepen discounts to keep customers from defecting to the used-car market. New-vehicle sales have started to cool this year following a seven-year growth streak.

As new car prices have climbed, auto lenders have kept monthly payments low by extending loan-repayment terms to five and six years and introducing 0% financing on loans that made buying new a more attractive deal.

But as interest rates rise and credit tightens, auto companies are pulling back on such sales incentives. The average monthly payment on a new car was $536 in August, up from $507 last year and $463 five years ago, according to

Source: Used-Car Sales Boom as New Cars Get Too Pricey for Many – WSJ

$1.5 trillion student loan debt, $1.1 trillion auto loan debt and ~$1 trillion in credit card debt -what could go wrong?

$1.5 trillion student loan debt, $1.1 trillion auto loan debt and ~$1 trillion in credit card debt -what could go wrong?

It’s that time again, an update on the degree of consumer borrowing as tallied by Federal Reserve data. For those of us that have been watching other consumer spending, debt and savings metrics, the results come  as little surprise and serve to confirm not only our Cash-strapped or Middle-Class Squeeze investing theme. The data also lends support to the growing concern over the ability of the consumer to thrust the consumer spending led US economy ahead as the Federal Reserve continues to boost interest rates in the coming quarters.


Americans owe $1.5 trillion in student loans

We hit this milestone during the first quarter of 2018, according to Federal Reserve data.

Outstanding student debt currently exceeds auto loan debt ($1.1 trillion) and credit card debt ($977 billion).

42% of people who’ve gone to college took out debt

A majority of them took out student loans, but 30% had some other form of debt, like credit card debt or a home equity line of credit, according to a Federal Reserve report based on a 2017 survey.

Average new grad owes $28,400Among those who finished a bachelor’s degree in 2016 with debt, the average amount was $28,400, according to The College Board. That’s up from $22,100 in 2001 (reported in 2016 dollars).


Source: Student loan debt just hit $1.5 trillion. Women hold most of it

Millennials increasingly cash strapped as incomes are hit by rent costs

Millennials increasingly cash strapped as incomes are hit by rent costs

No wonder younger Americans are taking longer to leave the family nest – it’s expensive out there! While growth rates in rents have slowed this year compared to the last few, Freddie Mac’s April Outlook report said that higher housing costs and younger adults’ decisions to delay buying have led to an uptick in apartment sharing and multigenerational households, thereby delaying the formation of new households. That’s a serious headwind to the economy given the mutiplier effect of housing on the economy.

Odds are this means the housing market will continue to face consumer spending headwinds as upcoming Fed rate hikes make the cost of owning a home even more expensive. Freddie Mac’s economists say that mortgage rates should edge upwards this year and in 2019, hitting 4.9 percent in the fourth quarter of 2018 and 5.4 percent a year later. Meanwhile, potenial homeowners struggle to save for the down payment given disposalbe income that is being hit by rent costs as well as servicing student debt costs and rising living costs.

This likely means the slowdown witnessed thus far in 2018 for rent growth will be a temporary one. While others watch for a would be rebound in the domestic housing market, we’ll be watching new apartment construction and what it may mean for rental rates, and discretionary consumer spending.


Younger adults are spending a stunning amount of money on rent — $93,000 by age 30, according to a new study. More important, rent sucks up about 45% of their income during this first, critical decade in the workforce. That leaves precious little left over to save for a down payment and work towards entering that second phase of adulthood — household formation.How does that compare to earlier generations? Not well.

Researchers at RentCafe who crunched numbers available from the U.S. Census say that, yes, on this front, things are harder for today’s 30-somethings.

GenX adults spent only 41% of their income on rent by age 30 ($82,000, inflation-adjusted) while Baby Boomers spent just 36% (about $71,000).

Things are not looking up for the next generation, sometimes called GenZ, either. RentCafe estimates that they’ll spend just more than $100,000 on rent by age 30, or nearly half their expected income during their 20s.

Source: Millennials spend a large percentage of income on rent

Consumer debt above Great Recession levels is a headwind to spending and the economy

Consumer debt above Great Recession levels is a headwind to spending and the economy

We’ve seen the reports of rising consumer debt, and a new one confirms one aspect of our Cash-strapped Consumer investing theme —  “wage growth has been stagnant for five years for a large segment of the working populace — and that using cards is the result of the simple fact that people have to use them to cover their basic living expenses.“ 

Sums it up in a nutshell, don’t you think?

The downside of higher debt levels, especially in a rising rate environment, is more income goes to servicing that debt shrinking disposable income in the process. Less disposable income means either more borrowing or less spending – one is a band-aid that will only drive interest payments higher later, while the other is a headwind to consumer spending.

No matter how you slice it, the eventual end result is the same. We at Tematica see this as positive for those companies that embrace our Cash-strapped Consumer and Cashless Consumption themes even though this is a headwind to domestic economic growth.

The New York Fed’s latest report on household debt tells a very sharp story about the U.S. consumer’s relationship with debt.

Consumers in the U.S. have racked up more debt than ever — $12.73 trillion as of the end of Q1 2017, nudging past the $12.68 trillion back in Q3 2008.

Credit card debt accounts for roughly one trillion of that number.“Where did the growth [in credit card debt] come from?” Schwartz asked rhetorically.  “Is it because card companies reached further down-market to pull more near- and sub-prime credit users into the market?

Or are we seeing more growth from the more affluent consumers who have higher [credit] scores and the ability to spend more?”

Answering that question, he noted, is quite complicated ten years after the recession,  because the answer is actually both — and it depends on what tranches of borrowers one looks at. The reality he said, is that wage growth has been stagnant for five years for a large segment of the working populace — and that using cards is the result of the simple fact that people have to use them to cover their basic living expenses.“

People have been using credit just to live their lives,” Schwartz said. “They aren’t putting $10,000 on their cards to take a fancy vacation — people have living expenses, and that is what is getting put on cards. I think we have seen a lot of that happen.”

Source: Post Great Recession, Consumer Debt Is Evolving |

Are you part of the shrinking middle-class? Think again…

Are you part of the shrinking middle-class? Think again…

Normally we’d say we love it when third parties come out with data that supports one of our investing themes. In the case of the Fall of our Rise & Fall of the Middle Class not so much as it means slower spending, a key engine of economic growth in the US economy. We can’t put a sunny disposition on the data that says the middle class has been shrinking inside the US. It’s a common trap to superimpose one’s view on the data, which is why we let the data talk to us so we here at Tematica can make informed decisions.

More and more people are falling out of America’s middle class.In fact, the Pew Research Center reported in 2015 that middle-income Americans no longer make up the majority of the people in the nation: “The American middle class is now matched in number by those in the economic tiers above and below it. In early 2015, 120.8 million adults were in middle-income households, compared with 121.3 million in lower- and upper-income households combined.”

Source: Here’s how much you have to earn to be considered middle class in the US

More China Travelers Heading Beyond Greater China in 2016

More Chinese travelers are taking outbound trips from China and this part of our Rise & Fall of the Middle Class is bound to drive incremental demand across all aspects of tourism and shopping. While the early waves of China tourists that traveled to foreign lands were wealthy and drove sales of luxury products and services, the looming question with this latest wave of travelers is if there will be different demographic implications?


By the end of September, 2016 had seen 101.5 million border-crossings from Mainland China take place. This is the first time that within the first three quarters of a year more than 100 million outbound trips from China were recorded.

According to the latest statistics based on the research of my institute, the COTRI China Outbound Tourism Research Institute, 51.7 million of these went beyond Greater China (Hong Kong, Macau, Taiwan), whereas 49.8 million — less than half of the total number of 101.5 million — stayed within Greater China.

This represents a year-on-year growth rate of 3.3%, which is split into a negative rate of -6.2% for Greater China and a still impressive 14.5% for the rest of the world.

Source: For The First Time, Chinese Outbound Trips Cross 100 Million Mark In Nine Months

As the OECD cuts U.S. economic forecast again, it calls on the debt rattled U.S. to step up spending

As the OECD cuts U.S. economic forecast again, it calls on the debt rattled U.S. to step up spending

As we’ve learned, shovel ready projects are like unicorns – they sound great, but few have ever seen them. With the US National Debt hovering at $19.3 trillion and Gross Debt to GDP at 105.2% per (the scariest page on the Internet), the OECD’s call “government in the US to step up spending is bound to ignite a powder keg as the 2016 presidential election moves into high gear.

The U.S. economy will expand 1.8% this year, down from 2.4% last year, the OECD said. The forecast is down from 2.5% in November and 2% in an interim report in February.

The world economy is forecast to expand 3% in 2016, the same as in the earlier forecasts. Slower growth in the U.S. will be offset by slightly stronger performances in Europe and Japan, the OECD said.

Now it is up to governments in the U.S. and elsewhere to increase spending to jolt the global economy out of a “low-growth trap.”

Source: OECD lowers U.S. economic forecast, implores world policymakers to ‘act now’ to boost growth – LA Times