The Savvy Wallet

Permabulls vs. Permabears: What They Are and How They Affect the Market If you follow the financial news, you may have come across terms like permabulls and permabears. These are labels used to describe investors who have a persistent bullish or bearish outlook on the market, regardless of the actual conditions. In this post, we will explain what these terms mean, how they differ from normal bulls and bears, and what impact they have on the market. What are permabulls and permabears? Permabulls are investors who always expect the market to go up, no matter what. They tend to ignore or downplay any negative information or risks, and focus on the positive aspects of the economy, the companies, or the asset classes they invest in. They are optimistic about the future and believe that any downturn is temporary and will be followed by a strong recovery. Permabears are the opposite of permabulls. They are investors who always expect the market to go down, no matter what. They tend to exagger...

What is a balance sheet recession and why should you care? A balance sheet recession is a type of economic downturn that occurs when a large portion of the private sector is trying to reduce its debt rather than spending or investing. This can happen after a burst of an asset price bubble, such as the housing bubble in the US or the stock market bubble in Japan, that leaves many households and businesses with negative equity (their assets are worth less than their liabilities). A balance sheet recession is different from a normal recession, where monetary policy (lowering interest rates or injecting liquidity) can stimulate demand and revive the economy. In a balance sheet recession, people with negative equity are not interested in borrowing more money, even at very low interest rates, because they want to repair their balance sheets and restore their credit ratings. Moreover, lenders are also reluctant to lend to those with impaired balance sheets, especially if they have their own b...

Consumerism After COVID-19: Post-Pandemic Consumer Behavior Changes The COVID-19 pandemic has been a global crisis that has disrupted the lives of billions of people. It has also changed the way consumers behave, shop, and spend their money. Some of these changes may be temporary, while others may last for years or even become permanent. In this blog post, we will explore some of the major trends and implications of the post-pandemic consumer behavior changes for the finance industry. E-commerce boom One of the most obvious and significant changes in consumer behavior during the pandemic has been the surge in online shopping. As lockdowns, social distancing, and health concerns limited physical store visits, consumers turned to digital channels to buy everything from groceries and essentials to clothing and electronics. According to a report by PwC 1 , more than 50% of the global consumers surveyed in June 2021 said they had used digital devices more frequently than they had six months...

  The Wealth Effect Theory Explained in One Minute: Will/Should You Spend More If You “Feel” Richer? Have you ever felt more confident and willing to spend money when your home value or stock portfolio goes up? If so, you may have experienced the wealth effect, a behavioral economic theory that suggests that people spend more as the value of their assets rise 1 . The idea behind the wealth effect is that consumers feel more financially secure and optimistic about their wealth when their homes or investment portfolios increase in value. They are made to feel richer, even if their income and fixed costs are the same as before 1 . According to the wealth effect theory, this increase in perceived wealth leads to higher levels of spending and lower levels of saving. This theory can also be applied to businesses, which tend to increase their hiring and investment levels in response to rising asset values 1 . The wealth effect can have a positive impact on economic growth, as higher consu...

Why and How The Rich Are Getting Richer… in One Minute: Context, Reasons and Consequences You may have heard the phrase “the rich get richer and the poor get poorer”. But is it true? And if so, why and how does it happen? And what are the effects of this growing gap between the haves and the have-nots? In this blog post, I will try to answer these questions in one minute, using some facts and figures from reliable sources. Let’s start with some context. Context Economic inequality refers to the unequal distribution of income and wealth among individuals or groups in a society. Income is the flow of money that a person or household receives from work, investments, or transfers. Wealth is the stock of assets that a person or household owns, such as money, property, or stocks. There are different ways to measure economic inequality, but one common indicator is the share of income or wealth that goes to the top 10% or 1% of the population. For example, according to the World Inequality Dat...

Corporate Welfare/Socialism Explained in One Minute: Privatizing Profits and Socializing Losses Have you ever wondered why some big corporations seem to get away with making huge profits while avoiding taxes, regulations, and accountability? And why, when they fail, they get bailed out by the government using taxpayers’ money? This is what some critics call corporate welfare or corporate socialism: the practice of giving special favors and benefits to large businesses at the expense of the public. One way to understand this phenomenon is by using the concept of privatizing profits and socializing losses. This means that when corporations are successful, they keep all the profits for themselves and their shareholders. But when they make bad decisions or face market downturns, they expect the society to bear the costs and risks. They do this by lobbying the government for subsidies, bailouts, tax breaks, or other forms of assistance that shift the burden from them to the rest of us. For ...

Consumer Price Inflation and Asset Price Inflation Compared Inflation is a term that is often used to describe the general rise in the prices of goods and services over time. However, not all prices increase at the same rate or for the same reasons. In this blog post, we will compare two types of inflation that affect different aspects of the economy: consumer price inflation and asset price inflation. What is consumer price inflation? Consumer price inflation, also known as the consumer price index (CPI), measures the change in the prices of a basket of goods and services that are typically purchased by households. The CPI is calculated by taking the average of the prices of a representative sample of items, such as food, clothing, housing, transport, health care, education, and entertainment. The CPI is expressed as a percentage change from a base year, which is usually updated every five years to reflect changes in consumption patterns. The CPI is used to monitor the cost of living ...