Stock Ownership Rate Plunges as Credit Card Debt Soars

The savings rate is at a 12-year low. Revolving credit is at a record high and the stock ownership rate has plunged.

Stock Ownership Rate Collapses

One way to support consumption is to sell your stocks. Many did just that.

Here's the Gallup question: Do you, personally, or jointly with a spouse, have any money invested in the stock market right now -- either in an individual stock, a stock market fund, or in a self-directed 401(k) or IRA?

Ownership Distribution

Heading into retirement, only 54% of those 65 or older own "any" stocks, down from 62% in 2008.

The stock ownership rate of those making less than $75,000 plunged 13 percentage points to 54%.

I suspect the 50% line is near $70,000. Those making less struggle to save.

Also, note the disturbing rates for blacks and Hispanics.

Revolving Credit

In January, revolving credit made a new record high.

Meanwhile, the personal savings rate has plunged.

Personal Savings Rate

Undoubtedly, the wealth-effect of housing boosted spending just before the great recession.

I believe a similar thing is happening now.

Personal Savings Definition

Personal saving is defined as personal income less personal outlays and personal current taxes.

Definition Exposes Problem

The definition lumps all the income and all the outlays comes up with a savings rate of 2.6%.

It's falling but at least it's still positive, on average.

However, that revolving debt is not evenly spread. It is concentrated in the bottom half of the population which goes further and further into debt to support consumption.

A 2017 Holiday Shopping Report shows that in November of 2017, 24% of millennials were still paying down credit card debt from Christmas of 2016.

​An increasing percentage of people struggle to save anything as credit card debt soars out of sight.

Yet, former Fed Chair Ben Bernanke tells us there is a "saving glut".

Yeah, right.

Mike "Mish" Shedlock

"Stock Ownership Rate Plunges as Credit Card Debt Soars" I think the Swiss national Banks owns some $92 billion in stock. What would happen to the SNB if the stock market crashed again?

Good article. Now that the ten year rate has popped over 2.7%, the level I always considered critical to an economy building up debt and feasting on cheap credit, the economy and the stock exchange will be severely tested. It will be like walking into a wall and bouncing backwards. I wonder what will be silenced more, the stock exchange or Trump's tweets. I would be cautious about the savings rate which is not a true rate but a balancing figure. If the 1% declared their income, then it would be a more accurate indicator, but what tends to happen during the final stages of a frothy economy is that the savings rate plunges without really plunging, because the froth is impossible to measure but it encourages spending which is measurable.

The Savings Glut has ended, celebrate

So how do employer automatic 401k payments calculated into all of this? My employer automatically contributes to my 401k regardless if I have any additional reductions from my pay. I guess the 401k is now the new pension. So if I save nothing from my take home pay, I still have a growing 401k each month at no cost to me. Do those values get worked into the savings? I’m guessing not.

Oh, and if you adjust for inflation, total consumer revolving credit (minus the student debt reclassification spike) is still below the peak of 2009. Growing, but not what I would call exploding.

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i dumped my stock holdings in 2008, never to return, as a way to thumb my nose at what i perceive to be a ponziconomy.

i'd like to think the collapsing stock ownership rate is a common sense reaction to absurd equity valuations but in the context of a collapsed savings rate and increases in personal debt like credit cards, that's clearly not the correct narrative

Mish, I think the headline is a bit too overdone. It appears we're talking about around 10% down in 10 years. That sounds very, very stable, though, what with the stock market going up so much during that time, one might expect a rise of 10% rather than a drop. But this poll doesn't address quantity of stocks per person. Just who has something they know about. (Doubtless many people have stocks they don't know about. Pensions, etc.)

Bigger picture. Consider age 18-29's percentages back in the time before discount brokerages and 401Ks. Probably would have rounded down to 0% in those days. So, the move toward stocks taking some of the "store of value" role from cash and savings accounts has been significant. At the same time, stocks don't represent direct ownership more than cash does in today's world, do they?

As long as the public believes that the investment banks are running stocks with carry trade debt, it conceives that the game is rigged against it. And as long as interest rates are less than the rate of inflation there's good reason not to save. These are not behaviors which are independent of the government manipulation of financial markets. In some respects they are a perfect reflection of government intervention in financial markets.