Record Hot Winter And LTRO Sent US Household "Net Worth" Up By $2.8 Trillion In The First Quarter

Curious why the Fed chairman has officially long given up on focusing on housing (and of course generating jobs, or worrying about inflation) as the main source of US household "tangible" net worth creation, and is mostly focusing on the Russell 2000 as per his own words? Wonder no more: as the chart below shows, as of Q1 2012, over two-thirds of household assets, or 68.8% to be specific, was financial assets, or $52.5 trillion: assets who value is dependent primarily on the S&P 500.

As noted above, financial assets are those whose values are driven exclusively by the moves in the S&P. Sure enough, of the $2.8 trillion increase in household "net worth", $2.3 trillion came exclusively from the rise in the S&P, which in turn impacted "corporate equities", "mutual fund shares", and "pension fund reserves", which according to the just released Q1 Flow of Funds report from the Fed, rose by $900 billion, $500 billion and $800 billion in Q1 alone, bringing total household net worth to $62.9 trillion, or levels last seen in Q1 2008.

In other words, rises in the S&P 500 is where the US household gets the biggest bang for its rapidly devaluing buck. So why should Bernanke bother with real estate any more which in an ongoing environment of deleverarging will not rise for a long, long time, when he can simply go for boosting the S&P in any way possible?

Only in Q1 it wasn't the Fed: it was the ECB we have to thank, whose combined $1.3 trillion LTRO resulted in a double impact benefiting solely US households. That and the record warm winter, of course, which provided the cover for "economists" to spin plotlines justifying the rise in economic indicators, which were solely driven not by a general improvement in the economy, but by front-loading demand in the first 3 months of the year.


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