Financial Weather Maps

A Mahayana Buddhist tale describes two birds, the Kankucho, who live high atop the world's tallest mountains.  It's always cold there, so too are they.  Every night Mrs. Kankucho cries out "I'm freezing." and Mr. Kankucho reassures her, "Tomorrow we will build a nest to keep us warm."  But when the morning sun bathes their perch with its warm rays, they stretch out, soak it up, and forget all about their resolution to prepare for the bitter cold of an ensuing nightfall.

Recently, the U.S. Commerce Department reported that the savings rate here in America declined to 3.1% in September, matching a low not seen since December 2007.  There may be some reason to suspect the way this number is calculated, at least from a monthly perspective, but the overall trend of domestic savings has fallen steadily since hitting a level almost double the current reading back in 2015.

The savings rate is defined loosely as the amount left over after Americans have spent what they earned on a monthly basis.  The math determines that not spending every dime you make should leave something to tuck under your mattress.  Conversely, spending more than you earned means you went a bit into the hole.  September's decline suggests folks, in general, had to dip into their piggy banks in order to pay for everything they bought, or else they took on more debt to do so.  The pervasive decline in savings seen over the last couple of years tells a tale of increasing encumbrances even as the population at large reports feeling better about current conditions.

Is America increasingly populated by Kankucho birds?  Are more people feeling the warmth of prosperity and forgetting a harsher wind will someday blow?  It has been ten years since the last major blizzard.  Have too many people forgotten the ravages brought on by declining equity and real estate prices while unemployment surged north of ten percent.  Winter will come.  We don't know when but here at Atlas we watch for the leaves to turn.  Our indicators should provide plenty of warning and portfolios can be adjusted accordingly.  Nevertheless, complacency should never be an option.       (by J R)