Vancouver, BC (August 29, 2001): Yesterday was a day of non-confidence on Wall Street and the consumer was the culprit. Yet again!

Adrian Mastracci, fee-only investment counsel and financial advisor with Vancouver’s KCM Wealth Management, comments, “It's now become conventional wisdom that Wall Street pundits expect the consumer to step up to the plate and spend lavishly. We desperately want that economic malaise to come to an abrupt end.”

Mastracci continues, “We have expectations, we have realities. To his credit, the consumer has been doing an admirable job to fill our ongoing request. He’s been outfitting his household with a wide variety of goods and services. Perhaps, the weight of the credit he’s shouldering is becoming a little heavy.”

“Make no mistake about it, we need the consumer on our side. In the end, the experts may be right about the consumer saving of our economy,” notes Mastracci, “However, it’s not a surety that this will be soon. We just may be asking for a tall order!”

Mastracci offers the following observations about the state of the consumer:

1. The consumer is already struggling with mountains of debt. Much of any new debt to finance the recovery would have to come from credit cards, many of which are already at maximum.
2. Credit card rates have not fallen in step with the short-term rate reductions brought to you by Mr. Greenspan and Mr. Dodge. Unfortunately, credit card rates have remained high. Say the interest cost is 15%. If it’s not deductible for tax purposes, the real cost in the 40% tax bracket is 25%.
3. The U.S. Commerce Department reports that the personal savings rate plummeted from just over 6% in 1995 to just over 1% in 2001. This is a sign that savings accounts are depleted and cashflow is being diverted, perhaps to service debt. Therefore, new purchases may have to be paid for from the sale of assets, like stocks and mutual funds.
4. Since the bears have peeled back the value of many stocks and mutual funds, the consumer could well resist selling assets at a loss.
5. That same consumer may also be feeling overwhelmed thinking of how to replenish his bruised retirement nest egg.

“Our consumer climate in Canada is very similar to Wall Street,” pointed out Mastracci, “As examples, auto makers offer incentives that many consumers find resistible. Computers continue to occupy store shelf space instead of your desk space.”

“Cautious optimism is still the order of the day. Nevertheless, we need the venerable U.S. economy to fire on all cylinders before we notice major improvements,” comments Mastracci.

“It’s a tall expectation for the consumer to carry so much weight for so long,” indicates Mastracci, “I think he wants a little rest from the pressure of continued performance.”

“If you want to weather this scenario, I recommend factoring in the investment implications of the consumer not participating fully to assist the recovery,” sums up Mastracci, “Make sure your investment game plan is in place and don’t lose sight of the marathon of managing your money.”

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.