Monday, March 16, 2009

The changing American Dream?

Last week the Met Life Study of the American dream was making its rounds to trading desks and I found some
interesting items in there. First off the study found a shift in priorities from “investments” to “protection” . Unlike 12+
months ago when Americans craved a moderate dose of risk in their portfolios, today’s consumers are eyeing more
conservative investment and/or protection products for their personal safety nets. Among the top ten items that
consumers would most like to have in their safety net, most are insurance products — long-term care insurance,
health insurance, life insurance, annuities — or conservative investments such as cash or bonds. Only the fourthranked
(real estate) and tenth-ranked (mutual funds) carry a moderate level of risk. Last year, by contrast, the
number one priority was health insurance that continues through retirement (60%), followed by retirement savings
(52%). Stability and security are the new growth frontiers. One figure that might shock some readers - only 35% of
respondents had cash on hand for 3-6 months. A startling 59% of Americans say they would be somewhat or very
concerned about having to file for bankruptcy if they were to lose their job. This cuts across all generations and
income levels. Even mass affluent Americans are deeply concerned about bankruptcy, with 53% identifying
themselves as being at risk without a job. An equally high percentage of Americans is worried about home
foreclosure; two in three homeowners (64%) are concerned they would lose their home if they were to lose their
job. Generation X feels the most vulnerable, with 73% of Americans in this demographic group expressing concern.
Baby Boomers are the next most vulnerable group, with 63% reporting worry. Fears of bankruptcy and foreclosure
are also unusually high among Middle Market consumers — i.e., those between the ages of 35 and 44 with income
of $35,000–$100,000 per year. Two-thirds (66%) of these Americans risk bankruptcy if faced with a job loss. An
even higher percentage of Middle Market consumers are worried about home foreclosure, with 75% expressing
concern that unemployment would lead to the loss of their home.

Without a steady paycheck, 50% of Americans say they could not meet their financial obligations for more
than a month — and, of that, a disturbing 28% couldn’t support themselves for more than two weeks of
unemployment. This is pretty important stuff and hammers a theme we have stated for some time – consumer
deleveraging is just getting started and savings need to continue to rise. The attitude toward risk, if it endures also
has many big implications.
Source: 2009 Met Life Study of the American Dream

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