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Disposable Personal Income as a % of GDP

On last night's show, we  discussed the vanishing savings rate (Dismissed as unimportant by Jim Glassman) and the  Asset to Debt ratio -- which is reminscent of the same old argument in 1999: The asset then was equities, the asset today is real estate.

Lets now look at a different ratio: 

U.S. Disposable Personal Income as a % of Gross Domestic Product (Current $)

Source: Mike Panzner

The total amount of money Americans have to spend after taxes relative to overall output of goods and services has hit the lowest level in 25 years.

Remember, Debts are forever, while Assets are subject to markets forces and variable pricing!

Friday, May 12, 2006 | 11:47 AM | Permalink | Comments (28) | TrackBack (0)
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Comments

How has this Glassman guy become so famous? Did he tell people to get out of equities in 2000? I haven't seen CNBC in a while but didn't Bernstein cohost this week or a few days this week?

Even though he reduced his bond exposure and dumped that into stocks and cash, he's still underweight stocks and likely upped his equity allocation because of pressure from management as so many indices are making cycle or all time highs. Because his statements don't jive with his actions. He recently made the statement the earnings are the most cyclical based in 50 years and he thought we were at the earnings top. No revelation of earnings top. But quite a revelation in the cyclicality of the earnings.

That means earnings quality sucks and could also collapse instead of just tail off somewhat. And the market PE is likely artificially inflated short term. Throw in the unfunded pensions, options expensing and a few other pretty pictures including below average returns in pension investments over the next few years and you have a market that isn't so cheap.

Posted by: B | May 12, 2006 12:09:16 PM