December 2019 - Holiday Shoppers Flash Signs of Hope

Happy Holidays to Everyone!

Just as the global economy was about to sink into the abyss of a never-ending recession, like a real-life 2019 version of the Grinch who stole Christmas…

“NOT SO FAST!!” was the cry heard from the long-forgotten, often discounted, yet most powerful force in the economic world – the U.S. consumer. Like Rudolph the Red-Nosed Reindeer guiding the Global Economic Sleigh through a dangerous winter storm of industrial recession, the U.S. consumer has lit up its beacon of hope in the form of Holiday spending to remind us that consumer spending still makes up 2/3 of the U.S. economy and that the U.S. consumer is still the most dominant force in this world of commerce.

Without question, there is weakness in the industrial economy in many countries and we do not mean to make light of that. Japan may be already in a recession by some definitions and industrial production is slow across Europe. We take matters of economic risk and economic data seriously. However, you could fill quite a library with the mistaken economic prognostications over the past several years about an imminent economic collapse. There are definite concerns and some negative indicators. However, we see just as many if not more positive economic indicators these days, especially in the U.S. market. The tight labor market may in fact be holding back some companies from growing even faster. They simply can’t find quality job candidates for key positions.

Small business owner sentiment in the U.S., which is usually more in line with consumer sentiment and consumer spending, is moving higher as we close 2019. The unemployment rate is at a well-documented low point and Holiday spending is expected to hit new records this year.

We turn our attention again to leverage and more specifically, too much leverage. An old axiom is that debt and leverage are the fuel for economic growth. Debt is the gasoline in the economic engine. And just like too much gasoline will flood an engine and cause problems, too much debt will eventually not end well for an individual, a company or a country. There are examples of leverage and overleverage everywhere in the world and in our country.

This month, we reexamine the auto loan market, which is just one area of potential overleverage in the U.S. economy. There are others, to be sure.

Leverage is critical and essential for growth and increased production. Finding the right amount of leverage is about finding balance. Extreme positions, whether negative or positive, is not the way to find that balance point of where a particular business or industry should be leveraged. When we take an all-or-nothing, black or white position, it usually makes sure that there will be no balance. We need to be smart right now, keep our heads on straight and keep seeking balance.

We don’t plan to overspend this Holiday season, but my crystal ball doesn’t indicate that we are going to underspend either! And as always, we are extremely grateful for the United States, for the U.S. consumer and for the opportunities that we have to serve you in our business.

Thank you and Many Blessings to you and your families!