AP Writes: Five years after crisis, families are hoarding cash

 

Five years after U.S. investment bank Lehman Brothers collapsed, triggering a global financial crisis and shattering confidence worldwide, families in major countries around the world are still hunkered down, too spooked and distrustful to take chances with their money.

An Associated Press analysis of households in the 10 biggest economies shows that families continue to spend cautiously and have pulled hundreds of billions of dollars out of stocks, cut borrowing for the first time in decades and poured money into savings and bonds that offer puny interest payments, often too low to keep up with inflation.

“It doesn’t take very much to destroy confidence, but it takes an awful lot to build it back,” says Ian Bright, senior economist at ING, a global bank based in Amsterdam. “The attitude toward risk is permanently reset.”

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A bit of a good news for a change. While most economist will disagree with me, people are starting to act rationally by saving and not spending every single cent that they have. Such economists would argue that by saving (instead of spending) people are slowing down the velocity of the overall economy at the time when the economy needs stimulus the most.

Of course, they would be right. However, in this case saving money is a wonderful idea. In fact, I have been recommending this to my clients and my own family for a long time. My advice is simple, save as much cash as you can and get ready for a buying opportunity of a lifetime at the bear market bottom.

When will such a bottom occur?  My work shows 2016 as the date when the bear market that started in 2000 will finally bottom. At that stage those who have saved and preserved their capital will be presented with an opportunity of a lifetime to buy stocks at give away prices. In net terms, perhaps lower than March of 2009. When the eventual rebound comes, a lot of money will be made by those who are ready.  

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