Cramer Alerts

James Altucher: "The Underlevered American Household"

Barry is a scholar and a gentleman and I appreciate his engagement in the savings debate my article from yesterday apparently started. I only wish he'd done it here. Instead he did it on his blog.

Barry's first point is to look at the chart I put up about the negative personal savings rate and state, " We are consuming more than we are earning. I suspect the reason for this is the failure to adapt economically in the post crash environment."

I'm not sure if Barry read my article. The reason why I state the chart is mostly useless is because it does not say anything about "consuming" or "earning". It states exactly what you would expect it to state when you combine government with economists: nothing. For instance, it does not include capital gains in income. And yet if you make capital gains and roll it into a new house, the ENTIRE value of that house counts as expenditure. Since Q1 of 2006 was the largest quarter ever for capital gains it makes sense then that a graph that didn't include one side of that equation would show negative personal savings. Its like looking at one side of a balance sheet but not the other. Barry states later, "This is a simple series that measures savings, spending and income." No, its not. Read my article. There's nothing simple about it and I suggest everybody read the Federal Reserve description of the data as well.

Without understanding this (which I explain in my article) makes the next 3 paragraphs in Barry's post moot. However, I will address that Barry says, "The Failure to recognize the significant shift in the wage environment..." Wages have gone up every quarter since 1993 so I'm not sure what significant shift he's referring to.

Barry also states, "Perhaps a little context might provide some utility. The United States, for the first time since the Great Depression, has a negative personal savings rate."

During the Great Depression the US had deflation and a 20%+ unemployment rate. I can't even comment on any comparison Barry is making between then and now.

Finally, Barry concludes with: "I cannot so easily dismiss an data which represents an historical anomaly. Indeed, anytime something occurs in a long data series which has been a rarity historically, its worth sitting up and paying notice." I 100% agree. Which is why I looked at where the data came from and how it was constructed before I made my conclusion.

A couple of other points: A: I still wouldn't make investment decisions one way or the other off of this macro data. I'm always reminded that GDP went up 300% from 1966 to 1982 but the market was flat. However, when GDP "only went up 174%" over the next 17 years the market went up 1200%. As much as I think its entertainment to write about these meaningless macro numbers, I still would never use this data to make investment decisions.

And finally, I wrote the article here. Barry, who also writes here, could've responded here and we could've engaged in meaningful debate, as we often do. Instead I only get the message from dealbreaker.com and the WSJ blogroll (two sites I recommend) that he had written "Lets just look at what's wrong with a few items in Jim Altucher's column yesterday, "The Underlevered American Household."

# posted by Broker A @ 1:29 PM