REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

A report in today’s Wall Street Journal reminds us how unlikely it is that the baby boomer-led U.S. economy as we once knew it will ever be restored. Incomes, savings, investments, and consumption are now entering a new and very different era where all four seem to be going in the same direction – down. The decline in spending by retirees is clear to see in the chart below and baby boomers will probably have to cut back even more.

The diminishing work prospects will require many older folks to make do with less -  a discouraging outlook for firms hoping to sell them everything from dinners to cars.

As of 2008, the latest data available, people aged 65 to 74 were spending 12.3% less than they did ten years earlier, in inflation-adjusted terms. They cut spending on cars and trucks by 46%, household furnishings by 35% and dining out by 27%. At the same time, they spent 75% more on health care and 131% more on health insurance.

That’s a pretty remarkable shift in spending – from cars, clothes, and dinners out to monthly meds. Sadly, the health care industry is likely to be about the only “engine” for economic growth in the U.S. for some time to come.

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It’s funny how headlines for yesterday’s consumer confidence report left out a few critical words (appended above) about the exact nature of the rebound. The March reading for the Conference Board’s consumer confidence index made back about half of the February plunge that had taken this important gauge of the American mood back to the  level of last April, just after the worst of the financial market crisis. There’s more in this AP report.

Since so much of the U.S. economy is based on “confidence” – more specifically, both the ability and desire of Americans to spend freely when maybe they really shouldn’t – it’s hard to imagine how the pre-2008 mode of U.S. economic growth can be restored after what happened in 2008, yet, that seems to be what everyone wants.

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Biderman: Bond Inflows “Scary”

Charles Biderman of TrimTabs was on CNBC yesterday to talk about the most recent fund flow data and he characterized the continuing movement of money into bond funds as “scary”, noting that many retail investors don’t realize that bond funds aren’t a one-way bet.

Yes, it’s yet another unintended consequence of ZIRP (Zero Interest Rate Policy) where investors look at money market and CD yields of less than one percent and go searching for yield – after being burnt by stocks in 2008, the logical alternative is bonds.

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America’s finest news source, The Onion, tries to answer the question that’s on the minds of many people in this country regarding the rising attendance at museums.
IMAGE Here’s a link to the official Andrew Wyeth website and, after a quick look around, it seems that the staff at The Onion was being a bit generous in the “bleak” characterization.

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I Quit My Job Three Years Ago Today

Time really does fly when you’re having fun. It was three years ago today that I quit my job at semiconductor test equipment manufacturer Teradyne, Inc. in Southern California to head north and then head further north a couple years after that … we still never really look back.

The job market must be pretty awful for U.S.-based engineers these days. As I understand it, the facility where I worked in Agoura Hills that, at the peak of the tech boom had over 2,000 employees, is now down to about 10 or 20 percent of that.

I’m glad I only think about thinks like this once a year – on the anniversary of my departure in 2007 when the following post was offered up. It is reproduced in its entirety below.

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After more than seven years, today is my last day at Teradyne, Inc. (NYSE: TER), a major manufacturer of test equipment for the semiconductor industry.

I’d like to thank all the great people I’ve worked with over the years and I wish you all the best of luck in the future.

Since joining the company in January of 2000, time spent here has been mostly enjoyable – writing software for a world-class semiconductor test platform has had more than its share of excitement and challenges.

I can’t say that the last year or two have been as enjoyable as some of the earlier ones. Maybe it was because I was distracted by other interests.

Maybe too it was because “perpetual fire drill” is no way to live and there’s been a steady stream of talented engineers out the front door. Despite assurances heard by employees, the attrition rate doesn’t look normal to me.

Yes, I know things are changing – good luck with that.

(more…)

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