Remember the reason for QE2… that whole “wealth effect” thing? Well the problem with temporary manipulation of asset prices is just that… it’s temporary. Blow $600B through the hole, and while it creates temporary “happy happy time” (for a narrowing portion of our society), eventually market forces come back. As The Bernank would say … it’s transitory. And Q3 was another quarter of “giving back”. That said with the one of the greatest months ever in October 2012…. barring a disaster in these last 3 weeks, Q4 should again take us to a happy place…. and if the ECB can do their thing in 2012…. we can all party like it’s 1999 (NASDAQ).
Until we pay for it down the road…..
- Household wealth in the U.S. fell from July through September for a second straight quarter as the European debt crisis depressed stocks and home values decreased. Net worth for households and non-profit groups decreased by $2.45 trillion to $57.4 trillion (-4%), the Federal Reserve said today in its flow of funds report from Washington.
- Americans reduced debt in the third quarter, extending a string of declines dating back three years. (much of this is through mortgage default, but hey – beggers can’t be choosers)
- A 14 percent slump in the Standard & Poor’s 500 Index, the worst quarter since 2008, combined with another decrease in households’ real estate values in the third quarter.
- The value of household real estate decreased by $98.3 billion in the third quarter after dropping by $37 billion in the previous three months. Owners’ equity as a share of total household real-estate holdings was little changed at 38.7 percent last quarter, today’s report showed.
- The volume of outstanding home mortgages was $9.93 trillion at the end of the second quarter, the lowest since the end of 2006, according to separate Federal Reserve data. That means U.S. mortgage debt, a driver of consumer spending during the real estate boom, may be about to enter its fourth year of decline as foreclosures wipe out home loans and housing purchases fall.
- The value of financial assets, including stocks and pension fund holdings, held by American households decreased by $2.78 trillion in the third quarter, according to the flow of funds data.
- Household debt dropped at a 1.2 percent annual rate last quarter. Mortgage borrowing decreased at a 1.8 percent pace. Other forms of consumer credit, including auto and student loans, increased at a 1.2 percent pace.
- Stock portfolios make up about 15% of Americans’ wealth. That’s less than housing but ahead of bank deposits. Most stock wealth is owned by the richest Americans, who also account for a disproportionate amount of consumer spending. Eighty percent of stocks belong to the richest 10% of Americans.
- Today’s report also showed the balance sheets of businesses are faring better relative to households. Companies had $2.11 trillion in cash and other liquid assets at the end of the third quarter, up from $2.07 trillion in the prior three months.
- Total non-financial debt last quarter rose at a 4.3 percent annual pace, led by a 14.1 percent increase by the federal government and a 3.5 percent gain among businesses. State and local government borrowing was little changed.