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Morgan Stanley Warns: Americans Doing 'Dumb Things' With Their Money

Morgan Stanley Warns: Americans Doing 'Dumb Things' With Their Money
(Dollar Photo Club)

By    |   Thursday, 24 September 2015 07:56 AM

Morgan Stanley cautions that while the American economy is finally “self sustaining,” the U.S. consumer is “starting to do dumb things” with their money.

“Consumers are feeling pretty good, and they are starting to spend money again, and they're starting to do dumb things. They're starting to borrow money, they're starting to maybe buy that house they shouldn't or that car they shouldn't,” Business Insider quotes Mike Wilson, chief investment officer and head of research for Morgan Stanley Wealth Management, as saying.

Wilson, according to Business Insider, said that consumers are feeling feisty since the labor market seems to be improving, and with lower gasoline prices, there is more disposable income for personal goals such as living on your own and starting a family.

“[Consumers are] going to spend that extra dollar because they're feeling better. And now, the clock is ticking. We're into the final part of this recovery. It could last three years, it could last five years, it could last two years, I don't know. But that excess sort of behavior is starting to happen,” Wilson said.

In reality, Wilson and other Morgan Stanley officials countered, consumers really should globalize their portfolios by investing in Europe and Asian markets.

“For U.S. investors, we’ve kind of had this nirvana period of free lunch in recent years,” said Lisa Shalett, head of investment and portfolio strategies for Morgan Stanley Wealth Management.

Wilson said European and Japanese markets should be top considerations for U.S. investors, WealthManagement.com reported.

“International, developed markets are going to continue do better than U.S. markets on a relative basis,” he said.

“Japan looks a lot like the U.S. companies in the 1980s where there’s a lot of low-hanging fruit where they can generate earnings growth even with low economic growth because they’ve undermanaged their companies for so long. They’re the worst managed companies in the world. But that’s changing slowly,” Wilson said.

To be sure, the net worth of U.S. households rose in the second quarter due to an increase in the value of homes and investments, a positive sign for future consumer spending.

The increase added $700 billion to the total wealth of American families, putting it at a record high of $85.7 trillion, a report by the Federal Reserve showed on Friday.

However, the buildup in wealth, has done little to boost the overall economy, The Wall Street Journal reported.

Economists had hoped rising worth in U.S. households could induce — through what are known as “wealth effects” — enough spending and confidence to bring about a more robust economic recovery, the Journal explained. But economic growth has been sluggish, and many households have seen little of this wealth flow into their paychecks, the Journal said.

“I believe wealth effects exist, but I don’t think they’re as dependable as good old-fashioned job and income creation,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

“If we were able to generate much stronger job growth, that’s obviously the basic building block of a strong economy.”

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Morgan Stanley cautions that while the American economy is finally "self sustaining," the U.S. consumer is "starting to do dumb things" with their money.
morgan stanley, dumb things, money, consumers
Thursday, 24 September 2015 07:56 AM
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