Posted on 07/05/2003 11:36:42 AM PDT by sarcasm
WASHINGTON (Reuters) - When mutual fund powerhouse Fidelity Investments wants new ideas, one of the places it goes is Inferential Focus, a quirky New York prognosticating firm.
In their efforts to predict the future, the company's staff of seven, led by President Charlie Hess, read 350 publications on a regular basis. They ignore most of the noise -- surveys, prognostications, formal speeches and staged events -- and look for actual occurrences that can point to changes in American society, which can then be spun off into investable ideas.
What they are finding now is this: We're going down. Downwardly mobile, that is.
Even though the worst of the bear market might be behind us, the American middle class will continue to lose ground and the American consumer will continue to be squeezed for some time to come, said Hess and Gail Eisenkraft, one of his partners, in a recent interview.
They find that to be true at both middle and upper levels of the income spectrum. That has implications for the way we all spend and invest our money.
It's no secret that the U.S. has been on a rich-get-richer, poor-get-poorer track for several years. Most recently, the Labor Department said that the top 5 percent of America's wealthiest households earned 22.4 percent of national income in 2001, the most recent year for the compilation of these figures. That is its highest share since figures were first collected in 1967.
The lowest class, meanwhile, earned its smallest share, 3.5 percent. The middle section is slipping too.
Middle income households, which in 2001 earned between $33,315 and $53,000, earn 14.6 percent of American income every year. That's another 35-year low. Hess and Eisenkraft now say that this slump is spreading to the better-off, who are starting to act more like the less-well-off.
There are specific economic forces that will continue to hold the middle class down, says Hess.
Here are some of the events and trends that he sees working together to create a middle-class slide: the export of technical jobs and the continued unemployment of many American tech workers; the squeeze on state economies that will result in higher state taxes, fewer state services, and higher-priced state educations; the triple threat of high health-care costs, high debt burdens and continued weak stock prices and battered portfolios.
As a result, even the upper-middle class is starting to downscale spending habits and life style.
'We're seeing those pressures converge on the reasonably affluent household,'' says Hess.
More resourceful parents are sending their children to community colleges for the first year or two of higher education, just to save money. Everyone is shopping discount.
``The Dollar Store near Beverly Hills has shown more growth than any other Dollar Store in the country,'' Eisenkraft notes.
Maybe that's not all a bad thing. Perhaps if everyone is worrying about their money, they will spend less on empty status items, and nobody will have to be ashamed of being budget conscious. It might even be considered cool to shop the sales.
What, besides handwringing, can a squeezed middle-class person do?
Shop down and invest like everybody else is shopping down, suggests Hess. ``We are talking to our investor clients about the many plays that might result from the search for cheaper upscale and cheaper downscale.''
You can live well and spend less by nailing down a 15-year mortgage instead of a 30-year mortgage while rates are low; by buying used cars instead of new, and by looking for freshman-year college bargains, Hess suggests.
You can make money in the market on this trend by buying companies that sell used cars, good clothes at a discount, product manufactured homes or quality items at commodity prices, like the big warehouse stores.
Look, too, at for-profit trade schools that could benefit once middle-class students realize they are graduating college with tens of thousands of dollars in debts and no solid job prospects to speak of, suggests Eisenkraft. That's just one more way of investing in the downscaling of America, so that even if you're down, you can be up, at least a little.
Even though my job is in no way in jeopardy, I've been saving as much I possibly can and keeping completely out of debt.
Possibly. Though, my husband has a decent job--his company is skating on thin ice financially.
We have left the country once and we have decided this week we are going to do it again. It's the only way we can really get ahead.
Think of the things we have in our homes that not many would have owned even if they were available in the 1970's. Reverse osmosis systems, h20 softening systems, covered patios, sprinkler systems, etc.
You know we should be able to get a good paying job just because we want one regardless of our skill level. Here's the future - most manual labor is going the way of the dodo and unless you got something upstairs you're out of luck.
Thanks for the interesting info.
But won't it always get wider? How can it not get wider? There will always be bums and other losers who make zero. There will always be people in the black market who report making zero. Are other people supposed to stop working so that the gap between income groups doesn't widen?
Secondly, the whole "rich get richer" thing is not really what the statistics say. Take some star baskeball kid from Harlem who is poor. When he gets signed to a 50 million dollar contract, does the income of "poor" people in the statistics go up? No, he is shifted to the rich section, and the statistics show "the rich getting richer" when in reality the poor got rich. The point being that these statistics assume that it is the same group of people in each bracket all the time. It is not.
I find them to be one and the same.
Remnants? Well, these remnants sure are very vocal around here.
Actually, if you had read my post, I said that this was the least important reason to be concerned about having a next generation of Americans to carry on our nation. However, the fact that every Western nation is facing a fiscal crisis in their retirement systems is a major political and economic reality that must be dealt with.
We're facing a social security crisis because politicians have fostered this idiot Ponzi scheme and it must inevitably fail.
When a population fails to reproduce itself and faces national suicide, failure of the social security system is just one of the effects. Right now it's the one that is the most obvious, and the one that is causing political trauma in Europe and Japan, and increasingly America. Notice that revising Social Security is no longer the "third rail of American politics" the way it used to be.
Blaming responsible child bearing practices of limited family size ( by the way how many kids I have is MY buisness) is ridiculous.
Apparently you don't believe it's your business to carry on the work of America. The Europeans don't believe that it's their business to reproduce their societies either. That's why they're importing millions of Muslims, and why we're importing millions of Hispanics. Your attitude is nihilistic and suicidal.
I'm not familiar with Daschle's comment. However, I'd imagine that he was promoting more socialism as the answer, an approach with which I would not agree.
Gee, thanks. Can you refer me to the Dollar Store of health insurance?
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