Yardeni’s points are noted, but they are all fluff points. First, employment lags economic growth by 1-3 quarters. It is a lagging indicator. Second, the quality of jobs is changing from higher paying manufacturing with benefits (pension and health insurance) to lower paying retail without benefits. Third, the phone survey used to measure employment is not the most accurate way to measure employment, since a 20-hr-week daycare worker is counted as employed. Perhaps 20 years ago, she would have had a full-time job for a manufacturer, but now all she can do is part time daycare.
Homes dropping in value are a big deal, especially for the people relying on MEW to sustain their spending, for those who are trying to sell but are underwater, and for those counting on rising home equity to fund their retirement. He forgot to mention ARM resets, and that exotic loans are used nationwide. Even WY had 25% ARMs last year.
Maybe the guy who paid $800K is ahead if the $2 mil house drops to $1.5 mil, but what if the guy paid $2 mil? Then what? What about all the people who bought in the last 2 years who lost all their equity? What about all the ARM resets, and the upcoming short sales?
He’s wrong about Americans. They are not stupid, but they are irresponsible with finances and don’t plan for tomorrow. So we’ll have an entire generation of baby boomers in poverty at retirement. We’ve got people getting ARMs at a time of historically low interest rates. Actually, that is stupid, when you get a 2.9% ARM instead of a 30 year fixed at 4.9%.
Too bad the interview was a conversation instead of a real inverview. Yardeni sure has some explaining to do.
