“Neither a lender nor a borrower be.” If you borrow to invest, it will interfere with your survivability. Unleveraged portfolios cannot be stopped out, leveraged portfolios can. Leverage reduces the investor’s critical asset: patience. (To digress, excessive borrowing has turned out to be an even bigger curse than Polonius could have known. It encourages financial aggressiveness, recklessness, and greed. It increases your returns over and over until, suddenly, it ruins you. For individuals, it allows you to have today what you really can’t afford until tomorrow. It has proven to be so seductive that individuals en masse have shown themselves incapable of resisting it, as if it were a drug. Governments also, from the Middle Ages onwards and especially now, it seems, have proven themselves equally incapable of resistance. Any sane society must recognize the lure of debt and pass laws accordingly. Interest payments must absolutely not be tax deductible or preferred in any way. Governments must apparently be treated like Polonius’s children and given limits. By law, cumulative government debt should be given a sensible limit of, say, 50% of GDP, with current transgressions given 10 or 20 years to be corrected.)

In Shakespeare’s Hamlet, it was Polonius who said, “Neither a borrower nor a lender be”, words of wisdom that seem to have gone out of fashion over the last thirty years or so but that now seem to be making a strong comeback.

As shown below, during the worst of the financial crisis in November of 2008, this index fell only as far as 55.3, so, along with renewed volatility on Wall Street, count this as another indication that the months ahead could be perilous.

The expectations component dropped from 56.0 in July to a near-record low of 45.7 in August and the gauge of current economic conditions fell from 75.8 to 69.3. Moderating gasoline prices saw inflation fears easing, the one-year outlook for consumer prices steady at 3.4 percent while five-year inflation was seen at 2.9 percent.

Coming on the heels of this morning’s better than expected report on retail sales last month, you can’t help but wonder if Americans have decided to adopt the attitude of “Eat, drink, and be merry, for tomorrow we may die”.

Paced by gasoline station sales that rose 24 percent, overall sales were up 8.5 percent on a year-over-year basis in a data series adjusted for seasonal variations, but not inflation.

Auto sales rose 0.4 percent in July after a gain of 0.7 percent in June, continuing to rebound after supply disruptions in Japan during the spring. Excluding autos, sales were 0.5 percent higher last month after an upwardly revised gain of 0.2 percent the month before.

Despite moderating prices, gasoline sales rose 1.6 percent in July after dropping 1.7 percent in June and sales excluding both autos and gasoline rose 0.3 percent after a gain of 0.5 percent.

Nearly two-thirds of the nation (63 percent) is pessimistic about the current state of the economy and its future, with just 6 percent optimistic about both. The attitudes of wealthier Americans—those with incomes greater than $75,000 or more than $50,000 invested in the stock market—are now in line or even more downbeat than the nation as a whole.

Just 26 percent of Americans with incomes above $75,000 believe the economy will get better in the next year, four points below the national average. In December, it was five points above. For the first time in the survey’s five-year history less than half of those with $50,000 or more in stocks think it’s a good time to invest in the market.

Over the next year, most Americans think home prices will fall and wages will drop as they spend less, save less, and drive less while the number of these “wealthy” individuals using credit cards to help make ends meet almost doubled from 12 percent to 20 percent.

Stocks are shaking off a two-week slump after a report on retail sales wasn’t as bad as economists had predicted.

The Dow Jones industrial average, the Standard & Poor’s 500 index and the Nasdaq composite index are all on track to have their best day so far in June.

The government said Tuesday that retail sales edged down 0.2 percent last month, the first decline in nearly a year. That was slightly better than analysts were expecting. Americans bought fewer cars during the month, but the decline reflected temporary supply chain disruptions caused by the earthquake and tsunami disaster in Japan. Excluding weak car sales, retail sales rose 0.3 percent.

“The good news is the consumer is hanging in there,” said Rob Lutts, president and chief investment officer of Cabot Money Management.

At some point in the future, historians will marvel at how ordinary Americans watched the stock market go up and down – cheering its rise along with the mainstream financial media and lamenting its fall – in the mistaken belief that their economic well-being was somehow inextricably tied to it … well, it’s not.

Another mistaken belief these days is that, somehow, the over-leveraged U.S. consumer is still the main growth engine for the U.S. economy simply because, during the credit orgy of the last few decades, personal consumption rose to account for 70 percent of the economy.

During that same time, bank shares grew to record levels as a share of total stock market capitalization and, even after the events of the last few years, for some reason, most people think that we’re supposed to just pick up where we left off in 2008.

The era of economic growth fueled by expanding credit and consumer spending is over, yet so few seem to realize it (though another really good asset bubble could forestall a broader realization of this yet again).

The consumer confidence index fell for the first time in four months, down from 54.3 in November to 52.5 in December, as job worries are hindering confidence if not consumption, holiday sales seeming to set new records every day. Not surprisingly, after rising over the last year, the percentage of respondents planning to buy a home is back to where it was a year ago, that is, when it looked like the housing rebound was more permanent.

I’m not sure if I’d say the American society is now lost, but it’s certainly having problems finding its way in a world that is changing rapidly now that bubbles are inflating and bursting at an ever greater frequency.

Industry sales also fell 5% from July levels. August sales typically outpace July, as deals become available on older models ahead of the fall introduction of new model year cars. August sales would equate to an annual sales pace of about 11.5 million vehicles.

“Car buying is far from repaired, and consumers hesitate before they make a big ticket purchase,” said Jesse Toprak, an analyst with the auto pricing Web site Truecar.com. “It shows that the recovery is going to be much slower and more painful than expected.”

They used to say, “what’s more important than how the 5 percent unemployed spend their money is how those 95 percent who still have jobs spend theirs”. It seems only the numbers have changed, that is, from 5 to 10 percent unemployed.

Of course, Mercedes is reportedly having a blockbuster year…

I’m probably the exception to the rule here, but, it seems to me that unless you have an excellent excuse (e.g., medical bills or some other emergency), if you’re over the age of 30 or 35 and you’re paying credit card companies any money in interest or fees, you’re going about your finances all wrong and you deserve to be their debt serf.

Amid all the junk mail pouring into your house in recent months, you might have noticed a solicitation or two for a “professional card,” otherwise known as a small-business or corporate credit card.

If so, watch out. While Capital One Financial Corp.’s World MasterCard, Citigroup Inc.’s Citibank CitiBusiness/ AAdvantage Mastercard and the others might look like typical plastic, they are anything but.

Professional cards aren’t covered under the Credit Card Accountability and Responsibility and Disclosure Act of 2009, or Card Act for short. Among other things, the law prohibits issuers from controversial billing practices such as hair-trigger interest rate increases, shortened payment cycles and inactivity fees—but it doesn’t apply to professional cards.

Until recently professional cards largely had been reserved for small-business owners or corporate executives. But since the Card Act was passed in March 2009, companies have been inundating ordinary consumers with applications. In the first quarter of 2010, issuers mailed out 47 million professional offers, a 256% increase from the same period last year, according to research firm Synovate.

I’ve noticed these coming in the mail lately, but, like every other credit card solicitation, they quickly end up in the circular file. There has been only one exception though. We recently took American Express up on their gold card offer in return for getting a free Bose SoundDock Music System after we make $100 in purchases. The annual fee goes from free to $175 after a year, so, you know we won’t end up being long time gold card holders.