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Household Net Worth Jumps By $1.2 Trillion In Q3, All Due To Stock Market Gains As Deleveraging Continues For 10th Straight Quarter
With today's release of the Fed's Z1 statement, we once again see why Ben Bernanke's only "wealth effect" focus is on the stock market. In Q3 of 2010, household net worth jumped by $1.2 trillion from $53.7 to $54.9 trillion, the vast majority of which was due exclusively to a change in the value of "corporate equities" held by the public, which rose from $6.9 trillion to $7.8 trillion. Still, this level is only back to the $7.7 trillion as of Q1 2010, and is roughly 30% off the all time high of $10.3 trillion seen in Q2 and Q3 of 2007, aka the peak of the bubble. What is also notable is that consumer deleveraging, as everyone knows, is continuing: total household debt declined for the tenth consecutive quarter, and was down by $58 billion to $13,429.4 billion. The peak was $13,923 billion in Q1 2008, so just about half a trillion higher. Elsewhere, some may be surprised to learn that business debt increased to an all time record high of $7,351 billion, an $82 billion increase in the quarter. So even as all those continue to note the $1.2 trillion in non-financial cash built up by banks, of which at least half is offshore, at the very same time Corporations have grown their total debt by the same amount since Q1 2007. So net, it is not only a wash, but is domestically leveraging as companies don't have free access to the foreign cash even as all their debt is domestic. Hopefully that will finally end the "cash on the sidelines" farce. Yet the one chart which needs no introduction, or explanation is that of the Federal and State and Local Government debt. That grew by $350 billion in the last quarter as the government continues to attempt to offset the drop in household leverage.
Summary consumer balance sheet:
Change in Household debt:
Change in Corporate/Business debt:
Change in Government/State and Local
Source: Z.1
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And home values fell by 1.7 trillion this year.
BTW my food/gas/clothes cost more.
Thanks for that.
I don't understand what they expect to happen. Do they think the sheeple are just going to run out and max out their credit cards again? Are the people that stupid to repeat their mistakes? That question keeps me up at night :(
let me help you sleep better... the answer is YES
The last chart showing government debt says it all and explains where the "good times" in the stock market are coming from.
Looks like a bubble forming!
let the good times "roll"
Liftoff, we have liftoff of spaceship DebtAmerica.
I sincerely hope that the *Flip this house* crowd that managed to escape the RE bubble *pop* are heavily invested equities - This time I doubt they'll be able to time the market for a hasty retreat, what with their *Buy Da Dip* brainwashing...
Fait accompli suckers, got Ag?
Robo, Harry Wanger and Toatwhatever all go long equity markets and specific stocks right before they explode higher, they don't sell during any temp pullbacks, and they sell right before the market or specific stock is about to plunge, capturing a massive gain.
Then, they short the equity markets and specific stocks, immediately after they had sold, and they don't close their short positions at any of the reverse stairstep lower highs, but they close their short positions right when the equity market or specific stock has finally pulled back all the way.
Then they repeat these processes.
This is how they accumulate so many gains, so much profit, and talk about it in almost every post here.
It's easy to be the 1% that not only makes any money in sham markets, but is smart/fortunate/lucky enough to not lose your ass - just do what Harry Wanger, Robo, and Toadthwhatever do!
Or better yet, don't buy a lottery ticket trying to be a 1%er, but charge fees/commissions guaranteeing that you'll get paid no matter what the market does to those who want to be the 1%ers.
http://www.neurosoftware.ro/finance/tag/terrance-odean/
Academics like Brad Barber and Terrance Odean have studied the investment performance of day traders in detail. Not surprisingly, it’s ghastly. Here’s more from the NYT:
The great mass of studies point to the same conclusion: trading is hazardous to your wealth…. The losers far outnumber the winners…
The authors sifted through tens of millions of trades, from 1992 to 2006, and found that 80 percent of active traders lost money.
“More importantly, we found that if you were to look at the past performance of these traders, only 1 percent of them could be called predictably profitable,” says a co-author, Brad M. Barber, a finance professor at the University of California, Davis. Everyone else, it seems, was on a short-term winning streak. Even those who did modestly well found their that profits were wiped out, and then some, by transaction fees like commissions and taxes.
“It’s not impossible to make money actively trading,” Mr. Barber continues. “There are slivers of people out there who are quite good. And everyone thinks they will be in that group of 1 percent.”
Those are some powerful numbers, so let’s review them again:
Put differently, far from this being an enriching line of work, 4 out of 5 people engaged in it pay to do it. Only 1 in 100, meanwhile, make enough to be worth writing home about.
The folks who predictably make money from day trading, of course, are the folks who sell traders tools for their day trading: Information courses, “how-to” advice, data streams, stock charts, technical analysis, trading clubs, investment advice, stock picks, you name it. Those folks do quite well from day-trading. Unless they’re dumb enough to actually trade.
But day trading is fun. Right? And it’s cool again. So, by all means, have at it.
I posted my picks a few days ago for the next wave... see picks below.
We will talk in 8 weeks ... Lol' Ahhhhh the doomers.
Unfortunately, 8 weeks (2-months) is an irrelevant investment horizon. Would be more interested in your (and anybody else's) 10-year, net of fees, after-tax returns. Benchmarked against the appropriate index (e.g. no small-cap portfolio returns vs. S&P 500).
http://www.zerohedge.com/article/luck-or-skill-what-more-critical-except...
Just like the gold rush. You make more by selling the shovels rather than trying to dig yourself.
Thanks for that post. It is always a good reminder that 80% of day traders lose. And that 20% make money.
If the value of housing declined so massively...how exactly did household net worth increase? Or are they skipping over the part about home owners?
Here's a link to that 1.7T number:
http://www.marketwatch.com/story/us-homes-to-lose-17-trillion-in-value-i...
I guess the entire jump in net worth is due to stock market gains, just as Spanky hoped. I am 100% certain that the man is a genius.
Bernanke making the assumption that J6P is "fully invested" in the market?
If the value of housing declined so massively...how exactly did household net worth increase? Or are they skipping over the part about home owners?
Housing values have plunged by at least 8.7 trillion (and I'm using the bull case numbers - alleged bears have pegged the figure closer to twice that).
We are not even talking about commercial, office or industrial property values, nor are we discussing the fallen asset values elsewehere.
Bernanke has loaned out over 9 trillion, expanded the Fed Reserve's balance sheet by 2 trillion (soon to be 3), all in effort to get equity index values up 1.x trillion - and all at a time when participation in equity markets is historically low.
That is the textbook definition of both insanity and inefficient (malfeasance, too?).
See where The Bernank is heading here? Total and complete failure on an epic scale.
When equity markets complete the trifecta, and sell off, The Bernank will find no cover nor concealment as every politician rushes to villify them, as they're being mobbed by angry senior citizens.
This is exactly why I bought a small mountain of physical Ag back in 2003 - My retirement nestegg/insurance policy to get me and mine through the inevitable collapse of the US Ponzi Debt Economic model.
Anyone still playing the markets for return -ON- capital is a fool-in-waiting (unless you're one the PD insiders), once the rush for the exits starts..it'll be ALL about return -OF- capital.
And hiding in U$Ts/U$Ds will not save you once this game is started...
P.S. All the pigmen know this to be *fact*, and have exponentially increased the rate of ponzi to clear as much booty as they can, before the music *stops* (e.g. Looting of FED/U$ Treasury).
EOM
The recent stock market gains are permanent and buying on margin has nothing to do with it. Besides, zirp is 4 evah. Sold on strength, left the casino, never looked back.
Who the hell dug all these freakin' cosmic bunny holes all over the place that I keep tumbling down? Increase in weath?
You know, this whole f'd up world, with its manipulations and deception, smells more like approaching marxism each day.
i think this article was refering to bill gross's bank account!
But this is current wealth and future debt, so I am better off now, right?
Thank you, Ben.
I feel comfortable, warm and fuzzy, in the virtuous circle of wealth creation.
Huh? Do any of you feel richer? I hope the Bernake's tongue rots in his head.
I would like to know what % of US households got the 1.2 trillion dollar bump? My guess it's in the 4% range and with home values decreasing this offsets the majorities gains . Just another pep rally from Wahington tooting their own horns with skewed information. The major reason for the decline in household debt isn't so much that the average Joe has scaled back, it's because of the write offs banks are having to take in bad debt. Write offs in which they are rewarded for taking by having the FED replenish their coffers through the continued circle jerk Ponzi.
Yeap, its time to buy a yacht on credit card.
Got to keep the illusion of pension funds, 401k's, etc. being pumped up. J6P doesn't have a dog in this fight... instead he is the mule pulling the wagon - getting whipped along the way. The final bubble being blown right now... at the Fed.
Whoa...look at the debt levels...looks like things are on the road to same old same old...really? Guess Americans do forget quickly.
The debt levels are even more massive than presented by anyone, given that no one knows what 'fair values' are anymore, and as fairy tale asset valuations are being used to offset the debt levels that they are even willing to concede.
The real crisis that they're painting over is that whole 'mark to market [they are marking to fairy tales]' thing.
Why do I get the feeling more and more every day that Ben and the guy the fell out of the BRE X helecopter years ago are the same guy?
Great news. Ride the wave .... Dow down 40. Does not matter ...
JPM ~ up 1.3%
DB ~ up 1.6%
DRYS ~ up 2.1%
JOBS ~ up 1.7%
HOLI ~ up 9.0%
AMCN ~ up 1.2%
National debt breaching 14 TRILLION. Does not matter...
Shadow banking deflation. Does matter ...
Nice to see deleveraging taking place among the consumer. In Canada, people are still gorging on cheap money as personal debt is still reaching all time highs. It can't end well.
I'll say that I feel richer, but that's because my wife and I are deleveraging like crazy, I work a part-time job which is used as our spending money, and we both got raises at our real jobs this year. So we have about ~25k less in debt, and +15k in income. It'll be even better this time next year (assuming the same trajectory).
Hard to be short when bank stocks are outperforming.
In fact the absolute worst financial stock on the planet is rallying the hardest.
I thought it was BoA ... Lol'
I would take it as a warning flare! They also have the most power to dump and leave you holding the empty bag. They just keep suckering you people in until they feel the timing is right and then poof...out go the lights.
In the words of the famous Eazy E:
"find 'em, f*k 'em, and flee".....
It's the only way to beat the banksters.
The mongoose, badger, or any other badass little weasel is able to kill and eat venemous snakes using their superior speed, moves, and agility.
Daytrading isn't for wimps, very few traders actually make money over the long run. But it's so simple. Hint - the moving average is the king of all indicators.
http://blogs.reuters.com/james-pethokoukis/2010/12/07/secret-gop-plan-push-states-to-declare-bankruptcy-and-smash-unions/
Debt = Death.
Credit = Dope.
Credit junkies and debt monkeys.
And unfortunately, modern economies based on fractional reserve banking principles are built on debt/death and credit/dope.
This is one of the reasons The Bernank gets his algorithmic signals crossed when his systems detect mass deleveraging. He translates this as a failure of the system, needing more of the poison that has caused the condition.
He knows no other way. All the world is a nail, and he has only a hammer on him.
He fights the deleveraging, which is actually a good thing, as if it were the cause of the contraction, rather than a rational response to a weak economic foundation, as in a symptom of the disease.
Modern Money Mechanics can only succeed in an world where growth depends on exponential debt/credit expansion, and inflation/devaluation. If that process ever stops, all systems fail. And eventually, there have to be failures given the realities of the structures and populations that are the true backbone of commerce.
But for The Bernank, being a ideological monetarist, all roads lead to his Chinook. He has already lost the battle, however, and deep inside, watching tidal waves of deleveraging wash over the globe, he knows it.
Gold getting blowtorched afterhours ....
Better turn up the propane to torch mine that I bought at $757 back when you were balling because your Casino account got wiped out...Sucker
Sorry bro - I moved out of debt in 2004. On lockdown until 8 months ago. The doomers I followed back then bought gold in 2002(itulip- EJ). Your late.
How's that home deflation treating you ? You should send uncle ben a thankyou note for slowing down the deflation in housing.
Housing Bubbles Are Not Like Stock Market Bubbles
http://www.itulip.com/gold.htm
Credit Risk Pollution
Funny you ask? Sold my house in Sept of 2007 on Peter Schiffs advise for 3x what I paid for it. I then bought Gold and put the rest in 5% CD'S with BOA just to watch them suffer. The money BOA is paying me covers the rent + on an upscale McMansion with a gardner and a pool boy. I have the likes of Peter Schiff , Gerald Celente and Doctor Housing Bubble to attribute to my fortunate decision. I think I'll stay in their camp as they seem to be the best place to get advice!!!! Oh and BTW, I owe $0 to anyone!
Good job.
Nine out of ten can't say that .... It was buy, buy, buy ...
You are speaking out of your arse. 9 out of 10? LINK, PLEASE.
The new underclass of long-term unemployed and 99'ers will certainly jump for joy over this latest number brought to us by Da Fed's department of The Bureau of Making Shit Up.
Note that if from a households point of view much of the paper wealth has been revealed as illusory, the deleveraging is actually farther along.
This is a healthy development--maybe the only healthy development we have--and of course the government and MSM are actively campaigning against it.
Oh, the extramodernity of it all...
+1 Interesting. No doubt we will see them again to give credence to the qualitative bulls in the papers soon.
Looking at table D.2, Business
Total Corporate
Q1 47.3 374.4
Q2 -9.4 266.8
Q3 185.2 328.5
Does this mean privately held business, in particular small business, have been contracting all along and by a large amount?
WOW a sure provocation for everyone to rush out and max out their credit cards, and the banksters are praying you do!
I feel wealthyyyyy oh so wealthyyyy and wiiiiise!! lol yea right.
So if personal "savings" per the BEA is $660B annualized where is it on the balance sheet? Household deposits down ytd. bonds flat, equities flat to down, etc...if there is any "savings" as reported by the bureau (...) where is it?
Meanwhile, in the real world, millions more enter the food stamp dole, millions more vie for free government housing and a majority in Congress pretend like they can't pass a bill because of the other side.
The insanity continues until the day it can't.
And what cracks me up the most is all the Y2K doomsayers, whom were proven wrong (as I and many of us with ties to IT knew they were) are now some of the loudest at screaming how wealthy they are in the market
Good times.
A glimmer of truth, but only a glimmer, on CNN last night courtesy of David Gergen:
GERGEN: Yes but let me -- I just want to come back to one point, Anderson. For the last two days we've been hearing about protecting the middle class, protecting the middle class. When we get serious about deficit reduction, you know who's really going to get hit hard? It's going to be the middle class. A lot of the mortgage deductions are going to get trimmed back. A lot of other things are going to get trimmed back.
And you know, I think that Washington is not being straight with people. Yes we've got this, we have a need to get these tax cuts extended, it has to be done and so forth and so on. But the trouble is coming from the middle class, and the sooner the President and the Congress full level with the American people, the better.
COOPER: Not an easy thing to do in Washington. David Gergen, I appreciate it. Nancy Pfotenhauer as well, Paul Begala, thank you very much. Ahead --
PFOTENHAUER: Thank you.
COOPER: -- a story we've been following for years, Warren Jeffs, the leader of the largest polygamist sect in North America awaiting trial now in Texas.
We have gotten rid of debt for the most part.
We are maintaining slightly over minimum each month on student loans. We think one day the entire system will fail and either they will eliminate the loan program that you cannot discharge except via your own death or they will do something to keep people flocking to the malls, colleges and up to eyeballs in debt and misery.
One thing no one has talked about.
The Unemployed run out of money. They get out the credit cards. Max them up in time and default. At that point nothing matters anymore to millions of people.
Filing for bankruptcy will feel no different than getting a dental cleaning done at that point with the Lawyer and fees paid with the last of the bank card credit line remaining.
Heh.
Only then will the straw break the camel's back because these credit cards are unsecured.
I thought Politcal ads were bad. But the constant Barrage of Lexus as a christmas gift (45-60K in debt anyone?) ads are quite disgusting.
I wonder when entire industry of advertising quit doing this crap and start making sense and themselves useful to those who have nothing.
Just wait until the County and Local towns are infected with borrowing because no resident is paying the same taxes based on falling values that they paid before on rising values.
But who cares? It's a few years down the road.
In fact. Forget all about the American Dream.
Become a renter, own a few things you can take with you and buy what you eat and drink each week.
Let the property owner (Land lord) Lie awake at night worrying about taxes, cost of maintaince etc.
Leverage kills. Always.
So, how exactly does household wealth increase when the banks and Fed are buying all of the common stock and households are selling.
My guess is that they are relying on an old and now broked algorithm... the assumptions are no longer valid.
....all the while losing $1.7T in home values:
http://online.wsj.com/article/BT-CO-20101209-713511.html
Remember that "households" includes hedge funds.
household assets up because of equities? wait, I thought retail was and is sitting it out ...
Hey nice chart of AIG up there. Thanks.
good to know that all the crooks have money to put back into the market and send it up higher again. The fasard continues people!!! Good god, when will it end.