The wealth management units of Morgan Stanley and Bank of America just posted double digit gains in the 2nd Quarter. This was due to substantial increases in lending.
Most of the people borrowing are one-percenters. The fact that this occurred during a period of rising interest rates and double digit losses in the stock markets makes it interesting.
Why? Because wealthy Americans are smart enough to buy when prices are low. This growth is a sign that the rich aren’t hiding in their mansions being afraid of the future.
The one-percenters are using their securities-backed credit lines to purchase assets that are inexpensive given today’s turbulent markets. Periods of market decline and volatility are when the wealthy make most of their money.
While current interest rates are ranging from 3% – 6%, historically these rates are still low. Many are putting even more savings into their brokerage accounts to increase their ability to borrow.
Let me leave you with this.
This is one of the best signs I’ve seen in a long time. It tells me that if we are going to have a recessionary dip, it won’t last very long.
Why? Because the one percenters wouldn’t be buying now if they thought this was going to be a protracted down market. They would wait until we were close to the bottom where they would get even better prices before initiating a buying spree.
Don’t misunderstand the message. I’m not telling everyone to run out today and put a second mortgage on their home so that they can buy a Maserati.
Debt isn’t a good thing. It’s bad. Before you go into debt, you must always know exactly how you’re going to get out. Living a life as a slave to debt is nothing more than a bad excuse of an existence.
What I’m trying to say is that this is the first good news about our lagging economy that I’ve heard in quite some time. The one percenters could be wrong, but I wouldn’t be in a big hurry to bet against them.
We are doing a webinar on August 9th, 2022 at 2:00 pm (CST) on “How To Get Your Company Through A Bad Economy”. It will cover issues like Inflation, the Difficult Hiring Market, Supply Issues, and Replacing Clients.
You may register for this webinar by going to the following web address.
We’re all going to get through this. Let’s get through it together.
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