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☕ DrinkCoffeeAndProfit
Smart money moves before breakfast
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Inspiration Quote for the Day
“Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
— Charles Dickens
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The Morning Ritual
Your Neighbor Is Grilling Steaks He Cannot Afford. So Is Everyone Else.
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I was at a cookout yesterday. Nice spread. Ribeyes, corn, the whole setup. Afterward my neighbor leaned over and said something that stuck with me. “I put the whole thing on the card. Steaks are up `40%` from last year.” He laughed about it. Then he went quiet.
That is the American consumer right now. Spending like things are fine. Feeling like they are not. The numbers landed this week and they tell the same story his face did. Consumer sentiment is at a `74`-year low. The saving rate just hit `2.6%`. And yet spending rose again. Something deeper than confidence is driving this.
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Partner Message
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In One Sip
► The personal saving rate fell to `2.6%` in April. That is the lowest since June 2022. Real disposable income dropped `0.5%` in a single month. Americans are spending faster than they earn.
► April PCE inflation came in at `3.8%` year over year. Core PCE hit `3.3%`. Monthly numbers were slightly below expectations, but annual readings are the highest since early 2024.
► The S&P 500 closed the week at `7,580`, near all-time highs. The 10-year Treasury yield eased to `4.45%` on reports of a possible Iran ceasefire extension. That is the interest rate the government pays to borrow for a decade.
► The VIX dropped to `15.32`. That is the market’s fear gauge. It is reading calm. But a `2.6%` saving rate and `3.8%` inflation is not calm. It is a gap between what markets feel and what households feel.
► Gas prices remain near `$4.50` a gallon nationally despite easing oil. Beef prices are up `40%` over two years. The grocery bill and the fuel tank are doing the math your brokerage app will not show you.
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Why It Matters for Your Money
Start with what `2.6%` actually means. For every `$100` your household earns after taxes, you are saving `$2.60`. In January 2021 that number was over `$20`. Think about that for a second. The cushion Americans built during the pandemic is nearly gone.
Now look at how the spending happens. Credit card debt stands at `$1.25` trillion. The average APR is `21%`. A household carrying `$6,700` in revolving debt pays `$1,407` a year in interest. That is a monthly car payment that buys you nothing.
I think the reason people keep spending is not confidence. It is exhaustion. Three years of being told prices will normalize trained people to stop believing it. So they buy the steaks. They book the trip. They put it on the card. Not because they feel good. Because waiting did not make anything cheaper last time.
The PCE report confirmed it. Inflation-adjusted spending rose just `0.1%` in April. People are spending more dollars on roughly the same amount of stuff. That is not growth. That is prices dressed up as demand.
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The Wealth Angle
The market does not see a problem. The S&P 500 is near record highs. The VIX is at `15`. Corporate earnings grew `25%` last quarter. On paper, everything works.
But I would not ignore what is happening underneath. Spending held up in April because people drained savings, not because incomes grew. Walmart posted record revenue and warned that lower-income shoppers are under financial stress. Sound familiar? It should. That was the same signal in early 2008 before consumer credit started cracking.
The 10-year yield dipped to `4.45%` on Friday after reports of a possible Iran ceasefire. If oil drops and inflation eases, the Fed gets room to eventually cut. That would help. But the consumer is not waiting for rate cuts. The consumer is spending now, on plastic, at `21%` APR. That math only works if rates come down fast. I do not think they will.
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☕ Key Insight:
A `2.6%` saving rate and `3.8%` inflation in the same economy is not resilience. It is a slow drain with a good poker face. The spending looks strong until you see the credit card statement underneath it.
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Coffee Break Move
If you are comfortable: Pull up your actual spending from May. Not the budget. The real numbers. Most people find `$200` to `$400` a month they did not notice leaving. Redirect half to your highest-rate card. At `21%` APR, every `$100` you pay down saves `$21` a year.
If you are stretched: Look at your credit card minimum payment. Then look at the interest line. If the interest is more than half the minimum, you are barely moving the balance. Even `$25` extra changes the trajectory this month.
My neighbor is a good man. He works hard. He grills good steaks. But that credit card bill is coming in three weeks. The grill does not care about your feelings. The APR does not care about the weekend. The only thing that cares about your money is you.
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