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One Chart Explaining Household Risk-Aversion

Tyler Durden's picture




 

Household net worth has recovered (nominally) around $8.0tn of the $16.4tn lost during the crisis but there has been a regime-shift in terms of the volatility of household net worth since the late 90s. As Credit Suisse notes, this hugely increased and skewed volatility has fueled heightened risk aversion among consumers and retail investors. Just as non-financial corporations are hoarding cash (on the back of their memories of the credit crisis contraction in the money markets), the lesson corporate America will not soon forget is just as resonant with Households as they value liquidity and cash (and safety) much more highly now than ever before.

 

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Wed, 03/28/2012 - 10:40 | 2297176 spastic_colon
spastic_colon's picture

anybody here NOT think Monday April 2nd will be a banner day for stocks and all things liquid?  Thought so.  perfect timing of 1st day of quarter after a weekend.  markets are setting up as we speak.

Wed, 03/28/2012 - 14:53 | 2298142 RollinsArline3
RollinsArline3's picture

my classmate's sister makes $67/hour on the laptop. She has been without a job for 6 months but last month her pay was $20212 just working on the laptop for a few hours. Read more on this web site .....  http://lazycash9.com

Wed, 03/28/2012 - 10:40 | 2297178 LawsofPhysics
LawsofPhysics's picture

Got cash?  You better.

Wed, 03/28/2012 - 10:41 | 2297179 jbc77
jbc77's picture

Couldn't agree more. I've become obssesed with stacking cash and physical metals. Fuck buying TV's and bullshit electronics I don't need. I like to be liquid, nimble and ready for the worst. Also drew a line in the sand as far as credit cards about five years ago. No more carrying balances over $100 on any card. I'm not playing "their" game any fucking longer.

Wed, 03/28/2012 - 10:43 | 2297185 spastic_colon
spastic_colon's picture

game or not, just good solid thinking...........

Wed, 03/28/2012 - 11:10 | 2297312 Vince Clortho
Vince Clortho's picture

Right Direction, but ...  Why carry any Balance at All?

Why feed the Beast?

Wed, 03/28/2012 - 11:29 | 2297393 Saro
Saro's picture

Right with you.  The last debts I have are a small student loan and an underwater mortage.  Now stacking cash and silver.

Wed, 03/28/2012 - 19:20 | 2299057 grid-b-gone
grid-b-gone's picture

I just got the new health insurance premium notice, +14%. Local utilities are all up by a double-digit rate. At least coffee appears to have peaked.

I don't know anyone in the private sector who is getting a raise that covers real-world inflation. The only way to make it is to cut, cut, cut.

I'm thinking of selling a vehicle that is not a necessity. I'm still solidly middle-class, but if I did not own my home outright, things would be very tight.

Wed, 03/28/2012 - 10:42 | 2297181 Robslob
Robslob's picture

I don't but the market is pricing in QE...then it will figure out more QE means more inflation...then it will figure out how fucked we are to need more QE if the economy was really improving and then it will...

 

 

Wed, 03/28/2012 - 10:44 | 2297188 Dr. Engali
Dr. Engali's picture

I'll add this to my other one chart explains it all collection.

Wed, 03/28/2012 - 10:46 | 2297191 firstdivision
firstdivision's picture

Funny, networth went volatile the minute that banks were green-lighted to play with customers deposits in the casino, otherwise known as "The repeal of the Glass-Steagall Act ".

Wed, 03/28/2012 - 10:52 | 2297211 Dr. Engali
Dr. Engali's picture

It's amazing how it all revolves around that one 13 page piece of legislation,yet nobody seems to be able to figure it out.

Wed, 03/28/2012 - 10:47 | 2297195 Milton Waddams
Milton Waddams's picture

When I lift people up by their ankles and shake them up and down in an effort to get the spare change to drop from their pockets... it produces a similar looking pattern.

Wed, 03/28/2012 - 10:49 | 2297201 Hugh_Jorgan
Hugh_Jorgan's picture

Another of  thousand retrospective charts illustrating the visble pre-quake tremors of the"big one" that we are all about to witness soon...

Wed, 03/28/2012 - 11:04 | 2297282 FreeNewEnergy
FreeNewEnergy's picture

Here's a "one-chart-explains-all" for ya:

 

Percentage of intelligent people who trust the Fed and federal governemnt.

 

100

80

60

40

20

0 ______________________________________________

Wed, 03/28/2012 - 11:32 | 2297409 irie1029
irie1029's picture

So true but how many intelligent (non-brainwashed) people are there?

Wed, 03/28/2012 - 11:19 | 2297352 TooRichtoCare
TooRichtoCare's picture

Used to be you'd have 100K of cash that used to be your stock market "play money" and you'd put it to work in various sectors based on your risk profile & return objectives.  When the market collapsed, everyone assumed that the regular guy was shell-shocked and as a result withdrew from the markets, waiting for calm & stability to return.  Now that everything is supposedly good again they can't understand why this risk capital isn't coming back. They blame the Flash Crash and other "trust" issues. Or they say that the market needs to break above a certain threshold, and then all of that money will finally be forced int.  

What they don't get is that there is an unprecedented increase in the number of people who now have to rely on their savings for income.  That $100k is no longer play money.  When you've been out of work for 2 or 3 years, and you realise that you may actually NEVER get a job again, all you have left to live on is your savings.  You hunker down, cut your costs down to bare bones, downsize your house etc, and see if you can make it stretch.  You have zero risk tolerance, cos if you lose it you're living in your car.  Whether the Dow is at 6000 or 14,000 makes absolutely zero difference.  Until people can get some job security and some certainty about getting a regular paycheck again, and until that extra money reverts back to being "play money", this stock market will continue to be a pro's game only

Wed, 03/28/2012 - 11:33 | 2297416 Catullus
Catullus's picture

I love the "market breaks above a certain level and money will come back in". That was the same thing the silver bugs got killed with last year. When the price goes up, people demand less of something.

This pig needs to take another 70% nosedive before I'd put money back in.

Wed, 03/28/2012 - 13:01 | 2297716 Silveramada
Silveramada's picture

wrong: silver got"killed" because of paper manipulation aka JP , HSBC.... beside, we suffer so much with all that silver we purchased at 10-15$ now that is only 30-35$...silver and gold are still the best performing assets 2001-2011

Wed, 03/28/2012 - 13:49 | 2297873 OldE_Ant
OldE_Ant's picture

I agree with your summary ToRich.. and will add the following:

Even if one has a job, and solid income such people have ridden the rollercoaster we call markets for 3-4 years now.  The latest hot air FED levitation has only taken the prices of any of the few things one might be tempted to buy and put them at stratospheric levels.

The so called market sheep bought high and sold low, not once but at least twice mostly to try to protect whatever they have left.   There is a saying.  Fool me once shame on you, fool me twice shame on me.  Virtually everyone with any assets absolutely will not enter these markets particularly when we are at nosebleed (or money bleed) straospheric levels.    The concept that somehow inflation or hyperinflation in prices will force people to 'chase' markets psychologically is wrong, and financially wrong.   Inflation/hyperinflation simply will eat into the remaining cash and paychecks making it harder and harder for anyone to have 'left over capital' to put to work in the 'capital markets'.

The game is so heavily rigged and stilted now that I know many people with cash desperate to find return, but simply can't find anything.  I ran number on real estate and with 15 year rates at 3.25% it's tempting to buy some property.  The problem is I already own a house and unless I can find some way to put that resource (i.e. a second house/property) to work for me and my extended family/friends I'm just not going to speculate at this point.   I'll stack cash, buy gold and silver and work on making my house and property more productive (water, food, energy) than putting money into the market.

These are the things people are doing with extra cash, as well as some of the reasons.  The only way I think about entering market positions is if we get a now 30-50% drop across the board and even then I will cost average in (provided it starts looking like the financial mess we are creating is clearing up - so far I don't see it).

So DOW 14k, 20k, 100k I really don't give a crap.  The higher we go the harder the fall, and the more manipulated the game is.   If I want to gamble (and I do on occasion) I'll go and play poker.  My return on my poker stake has been 2000% over the past few years.   Who can say they've done that good anywhere in the market?   The thing about poker is you know when you have a good hand.  In these markets there is absolutely no way to know where we stand.

For me I've also wanted to punish the TBTF players and have been doing so by simply not allowing my extra paycheck money to accumulate in my account.  Why?  Because I don't like hearing 'we need to get approval' when I want to take out a lousy 8-10 or 20k.  It's my money and if someone has to approve me getting my money - then guess what - it isn't my money anymore.   So I pull it out every month, stack silver, gold, even cash and am making judicious purchases to improve heating/cooling efficiency, enable water/food production, etc.   I think based on the fact that solar cell degradation is being found to not be as bad as projected (one should be able to have 60-80% capability even after 50 years of being in service) I think I'm going to install some solar and get a battery backup.   This way if the big solar storm hits I'll be the only one able to provide a small amount of local electricity - even if only for my home.   It makes a nice UPS backup as well - saving money there.

In conjunction with the points you make, the above are the approaches and thinking of people NOW and I consider this a sea change in human psychology that won't end for at least another 5-10 years minimum.

If the big boys were smart they would have let the DOW drop to 7-8k again for the 'double dip' and washed out the TBTF club by forcing bk or break up and then seriously went after (i.e. prision) the players that caused this stuff.  Then and only then maybe the 'sheeple' would have become believers and bought the dip.

The whole MF buck passing garbage makes me sick.  Put the suckers in Guantanamo bay - and do some wash boarding and see how fast they talk.   These big players need to be punished and the gaming zone needs to be cleaned up, made transparent, and levelled so no-one gets a 'special pass' to play or 'insider view'.

I have one suggestion to clear out the market HFT crap.  Make all traders pay a fixed percentage when they 'round trip' on trades.   This percentage is fixed for 1 share or 1 quadrillion shares and only changes based on how long you hold a security.  1 minute 10%, 1hour 3%, 1 day - 1 percent, 1 week .5percent, 1 month .25 percent, 1 year .1percent, etc.   You get the point.

BTW:  I did research on the system supporting virtually all commodity markets and they already have mechanisms in place to track in real time all positions in all accounts.   It's trivial to enable the system so we all can see all account positions in real time.   This is how the 'masters' can game us 'slaves' they literally can see all the hands at the table in real time now.

They now have the technology, and finally have put it to use.  Oh btw.  That new system went into place roughly 1-2 years before the crash. If everyone wants I'll hunt down the link to the technology paper and post it, since I did that research a few years ago while looking for a solution to the 'fully transparent markets' and found out they are already fully transparent to a few 'insiders'.

Wed, 03/28/2012 - 19:53 | 2299119 Praetorian Guard
Praetorian Guard's picture

If a solar EMP hits your solar array will not work...

Wed, 03/28/2012 - 11:21 | 2297357 asteroids
asteroids's picture

The numbers aren't inflation adjusted. Meat is up 30% at least from the beginning of the decade. Households have got a lonnnng way to go.

Wed, 03/28/2012 - 11:31 | 2297399 Catullus
Catullus's picture

Yeah. Net worth is up when priced at illiquid stocks and illiquid housing. Wealth illusion. Oh, and purchasing power has been destroyed so that $1 doesn't go as far.

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