Key Sectors to Watch This Late in the Market Cycle

Quote of The Day: How Gasoline Prices Impact Consumer Spending...

"Every penny increase in the price of gas at the pump equates to a loss of $1.0 t0 $1.5 billion in lost consumer spending in other areas."

Bloomberg News

Mountain of Consumer and Mortgage Debt Hold Retirees Hostage...

How Manufacturing Productivity Has Improved Our Lives...

The chart above displays the share of Personal Consumption Expenditures represented by 3 categories of manufactured consumer goods that are most important to U.S. households:

a) food and beverages consumed at home

b) clothing and footwear

c) furnishings and durable household equipment

In the late 1940s, it required almost half (41%) of consumer expenditures to provide for the household basics: food, clothing and home furnishings, which are all manufactured goods.  

For every $100 of consumer spending today, only $13.50 is spent on food, clothing and household furnishings and $87.50 is spent on everything else.  Contrast that to 1948, when it took $40 of every $100 of spending for the basics, leaving only $60 to spend on all other goods and services. 
     
Bottom Line:

Without the major productivity gains in the manufacturing sector over the last 50 years, it would still require almost half of consumer spending just to furnish our houses, and feed and clothe our families. 

The standard of living for the average American household has improved significantly over the last 50 years, and keeps getting better all the time, thanks in large part to greater manufacturing productivity.

Chart and Commentary Courtesy of 

CARPE DIEM

Professor Mark J. Perry's Blog for Economics and Finance

   

Q&A: Pimco's Mohamed El-Erian - Courtesy of Fortune Magazine

Pimco's CEO says individual investors must change their investing style, such as being less U.S.-centric.
By Geoff Colvin, senior editor at large

Pimco, the world's largest bond investor, has benefited from investors' flight to quality over the past two years and now manages about $1 trillion in assets.

Mohamed El-Erian, 51, is still thinking large and deep thoughts; his book, "When Markets Collide: Investment Strategies for the Age of Global Economic Change," won the Financial Times Goldman Sachs business book of the year award last year.

 
Mr. El- Erian sat down recently with Fortune's Geoff Colvin to talk about threats to individual investors, the best framework for an investment portfolio, how the 2008 financial meltdown was like a double-drive-through McDonald's, and much else.

 Here's a sampling of  some of the questions....

We've had one quarter of solid economic growth. Is the recession over?

Why are a lot of very positive things unlikely to occur for the consumer?

If American consumers start saving more, isn't that a good thing?

From the perspective of an individual investor, is the multipolar world a good thing or a bad thing?

What are the most important things that individual investors need to do differently?

What's the best protection for an individual investor against inflation?

In your book you present an asset allocation for a typical U.S. investor. Only 15% is in U.S. equities, which is much less than most U.S. investors hold. And only 14% is in bonds, U.S. and non-U.S., which seems like not very much. What's the logic?

You've said that this asset allocation -- which includes many other elements [see table] -- could be expected to return +5% to +7% a year in real terms over the long run. Many investors believe that U.S. equities will return much more over time. Is that just not correct?

A lot of new financial regulation is in the works. Is it going to be, as it so often is, regulation that will prevent the crisis that just happened and not regulation that will prevent the next crisis?

After the September 2008 crisis, you mentioned in Fortune that you'd asked your wife to withdraw cash from the bank. What was your life like?

What's your bottom line advice to individual investors in today's environment?

Full Interview - Click Here: Investing Advice from Mohamed El-Erian: Q&A with Fortune - Dec. 10, 2009